In numerous regions of Africa, traditional banking systems have encountered immense difficulty reaching the vast majority of the population, resulting in millions of individuals being excluded from accessing essential financial services. The lack of financial inclusion in Africa has had a crippling effect on economic growth, leaving small businesses and entrepreneurs struggling without the credit needed to prosper.

But in Africa, this issue runs deeper than simply not having access to banks. There is a fundamental lack of trust in the financial system, which has seeped into even the developed economies of the Western world. Despite high levels of banking inclusion, major bank collapses can trigger a chain reaction with far-reaching consequences.

The global economic meltdown of 2008 exposed the inherent flaws in the traditional banking system, prompting the creation of Bitcoin - a decentralized currency that offers freedom from the usual bottlenecks and nefarious dealings that plague conventional banking. What's happened recently has shown us that we need to find a different way to handle our money. The collapse of several banks, including Silver Gate Bank and Silicon Valley Bank, has made it clear that we need to act fast to address this issue. Africa's growing economy requires a better banking system.

This article highlights the inefficiencies of traditional banking and advocates for a paradigm shift to a more decentralized system powered by cryptocurrencies such as bitcoin.

What really happened to SBV?
In the worlds of tech and finance, the Silicon Valley Bank (SVB) was a major player as it is the 16th largest commercial bank in the US, holding $210 billion in assets. SVB has been hit hard by a massive run on the bank. It was a heavyweight in the startup world, providing financial services and loans to many startups, mostly in the blockchain and tech space, even to Circle, the issuer of the USDC stablecoins.

The root cause of SVB's downfall appears to have been its decision to invest its customers' deposits in Treasury bonds with fixed interest rates and mortgage backed securities, which became increasingly unprofitable as the Federal Reserve raised rates.

However, on Thursday, the bank's efforts to weather the storm came to a grinding halt, unable to keep pace with the onslaught of depositors clamouring for their funds after news of the bank's insolvency broke. In order to prevent the situation from spiraling out of control, the FDIC swiftly stepped in with a bailout. Meanwhile, the bank's UK branch has been acquired by HSBC.

The FDIC will try to remedy the situation by selling off SVB's assets and paying out all depositors within the week. The tech and finance worlds are holding their breath to see what's next for this once-mighty bank.

Why Africa Needs More than Just Traditional Banks: Insights from Silicon Valley Bank's Exit

As the dust settles on the collapse of two banks in the US, Silver Gate Bank and Silicon Valley Bank, questions linger on the impact of these failures on the banking system, not just in the US but around the world.

In Africa, traditional banking systems have failed to reach the majority of the population, and the recent collapse of big banks only further deters the unbanked from trusting traditional banks with the security of their money. The collapse of SVB also highlights the risk depositors face when entrusting their money to a single institution, especially startups, who are likely to be major losers.

We need new and innovative forms of banking that are transparent, decentralized, and free from the shady dealings of traditional banks. It's time to think beyond the status quo and develop a decentralized banking system that empowers all individuals, regardless of their social status or location.
Breaking Down the Problem with Traditional Banking in Africa
Traditional banking in Africa faces several challenges that limit its effectiveness in serving the needs of the population. These challenges include:
Limited access to banking services in rural areas
With up to 65% of sub-Saharan Africa's adults unbanked, the rural parts of Africa suffer from an inadequacy of banking services, which severely constrains the financial opportunities available to the population. Take Nigeria, where despite the presence of 22 commercial banks, 902 microfinance banks, and other financial institutions as of 2018, over 30 million adults - 36.8% of the population - lacked access to formal or informal financial services.

This predicament creates an uneven playing field, one where those who reside in rural areas are at a disadvantage compared to those who live in urban centers where banking services are more readily available.

High transaction fees and interest rates
In Africa, high transaction fees and interest rates have long been a problem with traditional banking. This has made banking unaffordable for many people, especially those in rural areas. Small businesses and entrepreneurs also struggle to access affordable credit due to the high interest rates charged by traditional banks, with some African countries' rate as high as 28%.

The World Bank's latest report has revealed some startling statistics about remittance transfers in Africa. As per the report, the average cost of these transfers was an exorbitant 9.4% in 2017 - a far cry from the targeted transaction fees of 3% set to be achieved by 2030 under the project, Sustainable Development Goal.

Lack of trust in banking institutions
The collapse of banking institutions like SVB can spread like wildfire, eroding public trust in the entire banking system. When people without bank accounts see those with accounts lose their money, it breeds skepticism about the system's ability to protect their own funds.

Nigeria's recent currency redesign backfired and caused chaos. Nigerian citizens experienced a currency crisis caused by a shortage of the naira. To improve the financial infrastructure and economy, the Nigerian government introduced a new central bank digital currency (CBDC), but citizens protested against being forced to use it, seeing it as a threat to their financial freedom. With over 56% of the population lacking bank accounts, many people experienced a cash shortage that worsened the already struggling economy. This incident further eroded trust in a financial system that was already perceived as unreliable.

Lack of Documentation
In Africa, a significant barrier to accessing traditional banking services is the lack of documentation required to open a bank account. Many people do not possess the necessary identification documents, making it impossible for them to establish an account. This lack of documentation can exacerbate existing social and economic disparities and prevent individuals from fully participating in the formal economy.


Difficulty obtaining loans and credit
Loans are essential for people, small businesses, and larger corporations and governments to survive. Many low-to-average income earners require aid in between paychecks. Africa's economy relies heavily on the activities of people in the low-to-middle class, which drive national economic growth.

In Nigeria, for instance, micro, small, and medium-sized enterprises account for 50% of industrial jobs and 84% of total employment and contribute about 49% to the country's GDP. However, traditional banks in Nigeria offer little funding to small businesses and low-income earners. Even when they do, they require excessive collateral and impose impossible interest rates on the principal amount. This is why decentralized loan facilities are needed to provide more accessible and inclusive financing options to those who need them most.

The role of blockchain technology in advancing alternative finance in Africa
In the early days of Bitcoin, Satoshi Nakamoto had already clearly explained the flaws in the current system that led him to create Bitcoin:

“

The root problem with conventional currency is all the trust that's required to make it work." The central bank must be trusted not to debase the currency, but the history of fiat currencies is full of breaches of that trust. Banks must be trusted to hold our money and transfer it electronically, but they lend it out in waves of credit bubbles with barely a fraction in reserve. We have to trust them with our privacy, trust them not to let identity thieves drain our accounts. Their massive overhead costs make micropayments impossible.”

From the words and ideas of Satoshi, one can rightly say that the idea of a currency system without any central authority will have a transformative impact on the economy of Africa. The following are roles blockchain can play in advancing alternative finance in Africa:

1. Peer to peer lending: One of its most significant contributions will be the facilitation of peer-to-peer lending platforms that enable individuals and small businesses to obtain loans directly from other individuals, eliminating the need for traditional banking intermediaries. This is particularly beneficial to small businesses who may struggle to secure loans from traditional banks.

2. Fast and Efficient Cross-Payment System: Blockchain technology would also revolutionize payments in Africa by enabling fast and cost-effective cross-border transactions, even for those without access to traditional banking systems. This is a significant development for those who live in areas with limited banking services, where traditional payment systems may not be accessible.

3. Micropayments: Another advantage of blockchain technology is its ability to enable micropayments. Traditional financial systems are not well-suited for handling small transactions, as the costs of processing them can be prohibitively high. In contrast, blockchain technology enables the processing of transactions of any size at a much lower cost, making it ideal for providing financial services to low-income individuals and small businesses.

4. Digital Identity: area in which blockchain technology will make an impact is in the creation of digital identity systems, which can be used to provide financial services to those who lack traditional identification documents. This is an important step towards financial inclusion in Africa, where many people are excluded from formal financial systems due to a lack of official identification.

Building a Better Future: How Blockchain Technology is Making a Difference in Africa
UBET [www.ubetsports.io], a blockchain-based sports betting platform, is a prime example of how blockchain technology is already making a difference in Africa. The platform allows users to place bets on sporting events using cryptocurrencies, providing a low-cost, secure, and transparent betting experience. UBET leverages blockchain technology to ensure that all bets are recorded on an immutable ledger, which makes it virtually impossible to manipulate the results.

Conclusion
To spark Africa's financial revolution, innovative and transparent banking is crucial. Traditional banking faces numerous challenges, such as limited access, high fees, and low trust. Silicon Valley Bank and Silver Gate Bank's collapse in the US highlights the risks of entrusting money to a single institution.

Cryptocurrencies like Bitcoin offer a solution by enabling decentralized banking systems that empower all individuals, regardless of status or location. A paradigm shift is necessary to drive Africa's economic growth and empower small businesses and entrepreneurs.