Introduction: Remittances have become the lifeline of many people in sub-Saharan Africa, but the cost of remittances through banks and remittance operators remains high.
According to the World Bank's latest report in 2019, remittances to the region, equivalent to $200, costs 9.3 percent of the amount on average, a cost that is quite high globally. However, when funds are sent through blockchain technology, the cost will drop by 90%.

The highest cost of cash transfer through a bank

Last year, Africans working abroad remitted as much as $46 billion in international remittances to their families. This money is usually used to pay for education, to buy food and clothing, to start a business, to build a home, and to pay for daily living. For many families in Africa's often unstable economies, overseas remittances are an important tool for their survival. However, a large part of their funds were earned by financial companies in the form of transfer fees.

According to the World Bank, among the most expensive institutions in Africa, banks charge the highest fees, accounting for 10.2%, followed by remittance operators (7.7%) and post offices (5.5%). This is too high compared to the sustainable development target of cutting financial transfer costs to less than 3% of the total transaction value by 2030.

Now, some people are looking forward to Bitcoin-backed legal currency remittances as a way to reduce the handling fee and improve the efficiency and speed of transfers.
In 2013, when Elizabeth Rossiello, an American political science graduate, founded Bitpesa, the company initially focused on facilitating Bitcoin-backed cash transfers between British and Kenyan citizens. However, Bitpesa currently operates in eight African countries: the Democratic Republic of the Congo, Ghana, Kenya, Morocco, Nigeria, Senegal, Tanzania and Uganda.

Stephany Zoo, marketing director at Bitpesa, based in Nairobi, said in an interview with news.Bitcoin.com that the company helps Africans remit or collect money from around the world at a fraction of the cost charged by traditional agents. She said that Bitpesa also provides services to global remittance companies using API services for payments to mobile money operators and the banking network in their African countries.
Zoo said: "In processing remittance payments, we integrated traditional insurance and personal insurance (such as international warranty services) and the use of cryptocurrency. We only charge 1% to 3%, so it's much lower than what the World Bank report mentioned. Many of our customers are transfer operators, they are actually providing money transfer services, we provide basic technology or software support for their work behind the scenes, and they are also their foreign exchange providers. "
Informal cash transfer

Last September, Bitpesa signed an agreement with Japan's SBI remittance company to allow people across Africa to pay for cars, beauty products and electronics. When Africans buy goods overseas, they deposit their legal currency into Bitpesa's bank account and then transfer the money to SBI's account via Bitpesa's Bitcoin blockchain, which then makes the final payment in Japan.

The whole process can be completed in a few hours, and the cost is about half of the usual transfer cost.

Bitpesa claims that traditional banks take several days to process similar transactions. The legal currency is also applicable to the remittance service for cryptocurrency deposits and transfers, except that the funds are directly transferred to the payee's account. Bitpesa said on its website, "This saves all intermediate links and saves on transfer costs, which can be completed in just a few clicks."

The data of World Bank did not reflect the true value of funds remitted from Africa or other African countries to Africa. Usually, remittances flow across borders through informal channels of friends, family or bus drivers. This is because sometimes the work to be done to remit cash through MTO is not worth the risk. Doing these means showing a passport, work permit or visa to indicate your identity, and many migrant workers do not have these documents.

Similarly, some cryptocurrency-based remittances have not received attention, and people have not noticed that they are serving this purpose. For example, Coinpesa in Uganda is primarily a cryptocurrency exchange, and its CEO, Suleiman Murunga, said that Coinpesa “does not directly engage in remittance operations”, which does not mean that they do not deal with transactions initiated as remittances. Murunga pointed out that remittances based on cryptocurrencies are difficult to track on exchanges, but he also stressed that this feature can help reduce the cost of transfer to around 2%, thus eliminating the conversion cost from cryptocurrency to legal currency.


Currently, according to the data of World Bank, as sub-Saharan African remittance markets are expected to grow by 4.2% and 5.6% in 2019 and 2020 respectively, from 9.3% to 1%, what has been brought about by