According to the World Bank, Small and Medium Enterprises represent 90% of all businesses you can find in Africa. For this reason, they lay the foundation for development in Africa and are doing well in covering lapses in the public sector. Unfortunately, SMEs in Africa encounter a lot of problems in their daily operations, including the seamless management and financing of different activities. The good thing is that the crypto space has evolved so much that it can now solve some problems that these SMEs encounter daily. This article discusses 5 ways crypto can benefit SMEs in Africa and make the operations of these businesses more seamless.
Why is there so much crypto potential in Africa?
So before divulging the 5 ways crypto can benefit SMEs in Africa, why do people think there is so much crypto potential in Africa? Certain factors make it possible for SMEs in Africa to adopt crypto payments. Some of these factors include:
a. Unemployment rate
With a significant number of professional and young entrepreneurs unemployed or underemployed in Africa, certainly, the continent can greatly benefit from cryptocurrency. This means that cryptocurrency can help to reduce the unemployment rate in African countries. So most young, unemployed, or underemployed Africans are constantly exploring employment opportunities in the crypto space.
b. Current use of virtual money
Cryptocurrency works just like virtual money and since many Africans already accept and use this kind of money, they are more likely to adopt and appreciate what crypto payments have to offer. Many Africans have already adopted mobile money platforms like M-Pesa, Momo, Airtel Money, OPay, etc. So it will be easy for people to adopt a virtual payment like crypto without any complaints.
c. Cushion for currency instability
For African countries experiencing high inflation, which is likely to affect their currencies negatively, it is easy for them to find solutions in the use of cryptocurrencies. For instance, when Zimbabwe’s inflation surged in 2015, some people switched to Bitcoin trading as a solution to the inflation. Now, more Zimbabweans are adopting and investing in cryptocurrencies, as protection for future hyperinflation. Now that crypto has become an alternative to government-controlled currencies in Africa, it’s safe to say that crypto payments can cushion currency instability.
d. Cryptocurrency can revolutionize remittances
Africans living in foreign countries can leverage the features of cryptocurrency to send remittances faster and more cheaply across borders. Using crypto to send cross-border remittances is cost-effective, as bank transfers are very expensive for Africans living in foreign countries. In fact, in some cases, banks charge as high as 20% for cross-border transfers. However, many cryptocurrencies allow people in other continents to send money to their families and friends in Africa with little or no transfer cost.
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Top 5 ways crypto can benefit SMEs in Africa
Now that you know why crypto has high potential in Africa, let’s see how SMEs in Africa can take advantage of cryptocurrencies. Here are 5 ways crypto can benefit SMEs in Africa:
1. Crypto offers decentralized and less expensive financial transaction costs
Due to the decentralized nature of cryptocurrencies, which allows users to manage their finances without restrictions, these digital coins are favorable for SMEs. Unlike the traditional financial system, which is restrictive and time-consuming, crypto offers entrepreneurs all the freedom and speed they need to integrate completely into the business world.
Also, the cost of completing crypto payments is generally cheaper than the cost charged by banks in Africa. For most crypto payments, users will be charged little or no transaction cost. However, sometimes, banks charge SMEs outrageous transaction fees which may negatively impact their financial growth.
For example, for a business owner to be eligible for a bank loan in Africa, they must have their business account domiciled with the bank, from which maintenance charges will be deducted at regular intervals. Also, the loans offered by these banks have exorbitant interest rates, which may further hinder the financial growth of the business. Cryptocurrency can be used as a financial inclusion tool for African businesses, as it gives them access to financial resources at a cheaper rate. Also, entrepreneurs get to manage their businesses without facing any restrictions.
2. Crypto transactions are completely safe
Since cryptocurrency is a virtual currency, thieves cannot steal it from a user. Also, hackers can’t steal your cryptocurrency without having the wallet’s private keys. So crypto transactions are completely safe and secure. Certainly, all businesses need security in their day-to-day financial operations and this can be brought to reality through crypto payments. As long as crypto payments are executed through a trusted platform, business owners can have assurance that their finances are in safe hands.
3. Crypto offers SMEs multiple means of payment
Integrating crypto as a payment method can expose African SMEs to international recognition, especially in their growth stage. Essentially, when businesses integrate multiple payment methods into their systems, it allows them to cater to different kinds of clients from all over the world. So even though these businesses may only be known locally, cryptocurrency can boost their growth both locally and internationally.
4. Cheap cross-border transactions
Unlike traditional banks that charge high fees on all of their transactions, crypto transaction costs are much cheaper. This is even so with international transactions, as banks slam businesses with outrageous fees for executing international transactions. Because of this, African SMEs with international partners usually incur lots of losses after executing transactions through traditional banks. However, this issue can be resolved with cryptocurrencies. African SMEs can adopt crypto payments to reduce the cost of both local and cross-border transaction costs.
5. Prepares SMEs for the Future
As the popularity and adoption of Bitcoin and the crypto space continue to increase around the world, its importance and value keep growing. So there is a chance that cryptocurrencies may replace traditional financial systems in the future. African SMEs can start adopting cryptocurrencies to make the transition from traditional to digital payments easier for them.
Even though this shift may seem impossible, small businesses can still play safe by accepting cryptocurrency payments to add better value and have a greater impact on themselves. Crypto also prepares these businesses for the likely future with new digital financial trends.
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What are the benefits of blockchain technology in Africa?
Thanks to blockchain technology, blockchain-based mobile money platforms can now provide basic financial services to the unbanked population in Africa. These platforms also secure and facilitate efficient transactions to attract more investment. This eventually leads to job creation and rapid economic growth.
Where can I buy crypto in Africa?
Bitmama is easily the best platform to purchase crypto in Africa. You can easily trade over 10 different cryptocurrencies through instant purchase or a P2P marketplace in a matter of minutes.
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How can blockchain help small businesses in Africa?
The benefits of blockchain technology to small businesses in Africa are endless. Essentially, blockchain allows small businesses in Africa to accept cheaper and faster forms of payment, execute smart contracts, improve supply chain management, and perform many more innovative functions.
We’ve discussed the 5 ways crypto can benefit SMEs in Africa, however, African businesses have to do the work by adopting what cryptocurrency has to offer. SMEs can integrate crypto payments into their systems in order not to miss out on the possible digital shift. Since crypto payments offer cheaper, faster, and more seamless transactions, certainly, it will greatly benefit SMEs in Africa and offer them opportunities to collaborate with leading organizations from around the world.
Bitmama offers a secure marketplace for crypto enthusiasts. Perform activities like crypto trading, and creating virtual dollar cards for online payment. Get started today by downloading the Bitmama app.
