BOSTON, Massachusetts — Golden Globe Award-winning movie star Idris Elba is taking a leading role in promoting financial freedom in his ancestral homeland of West Africa. He has partnered with the Stellar Development Foundation, a nonprofit organization dedicated to creating equitable access to the global financial system through blockchain technology. Together, Elba and the Stellar Development Foundation have assembled a strategic team aiming to integrate millions of West Africans, who currently lack any personal finance tools, into the global economy. Their primary strategy is promoting and expanding cryptocurrency exchange to achieve financial freedom in West Africa.
The Banking Challenge in West Africa
Less than half of the adults in West Africa have access to banking services. Even in Nigeria and Ghana, the region’s two largest economic powerhouses, fewer than half of the people have formal bank accounts. In other Sub-Saharan African countries, such as South Africa, citizens often avoid traditional financial services due to mistrust of banks’ motives, ATM fraud and oppressive bureaucracy within financial institutions. Many view cryptocurrency, powered by blockchain technology, as a solution to counteract these ongoing issues.
Cryptocurrency serves as a hedge against currency manipulation, which many governments of developing countries engage in to boost international trade efforts or reduce debt interest burdens. Such practices, which involve deliberate currency devaluation, are morally wrong as they reduce the buying power of ordinary working-class citizens by driving up inflation. Cryptocurrencies also help curb monetary inflation.
The Unbanked Majority
Many of the world’s poor, amounting to 75%, lack bank accounts, highlighting the challenge of building wealth without any savings or reserves. Villagers in developing nations point out that excessive travel distances to banks and high fees associated with account setup, maintenance, transaction costs and minimum balance penalties make traditional personal finance inaccessible. Historically, not having a bank account also meant no access to credit, as credit card payments typically require withdrawals from a checking or savings account.
Transport and Banking Accessibility
Transportation in Africa presents a significant challenge, with the continent having the highest transport costs in the world. These high costs make it particularly difficult for West Africans to access banks, rendering the task nearly impractical. Additionally, West Africa has only 7.8 ATMs per 100,000 residents, which is the second lowest rate in the continent, just above East Africa.
The African Development Bank Group (AfDB) states, “To open a savings account at Ecobank, one of Africa’s largest Pan African Banks, an individual has to fulfill the following requirements: complete account opening form, a valid piece of ID of each signatory (current driver’s license, national ID, international passport, student ID card for students or a registered association), proof of address (utility bills for preceding three months, site visitation, certificate of residence, tenancy agreement), two passport pictures among others. While such requirements may be routine, the majority of the population in low-income countries may not meet more than one of these requirements.” The fact only 13.7% of West Africans have access to financial institutions is reflective of those hassles.
The Role of Cryptocurrency
Coinbase Wallet and Exodus, two of the largest digital crypto wallets, charge no fees for account opening or minimum balances. Exodus does charge fees for selling or trading digital assets on its app. Both of these apps, along with many others, are available for free download on the iOS App Store and Google Play Store. Online desktop versions are also available.
To open accounts on these platforms, consumers need only one valid ID, which is much simpler than the multiple forms required by many traditional banks in Africa. With 60% of West Africans having internet access and only 13.7% having a bank account, cryptocurrency could significantly close the financial accessibility gap in West Africa from a market penetration standpoint. It enables full-scale financial coverage from the comfort of one’s home, eliminating the need to travel to brick-and-mortar banks.
Contrary to the views of crypto detractors, cryptocurrency can serve as an independent alternative to traditional banking because individuals can buy crypto coins without needing a credit card or bank account. Local shops in villages can easily act as intermediary sellers of various cryptocurrencies, allowing customers to purchase crypto coins directly with cash.
International Trade Impact
American trade relationships with many West African nations have indeed injected money into their economies through investment, but they also bring their share of negative effects. The strength of the American dollar, the world’s reserve currency, often hinders emerging markets by limiting the growth potential of local currencies. If organizations like the Organisation of African Trade Unity were to unite in using a default cryptocurrency for transcontinental trade, it could weaken foreign currencies and boost the African economy.
Idris Elba’s Vision
In a 2023 interview with CoinDesk, Idris Elba drew a relevant comparison between his field of video production and his newfound interest in promoting financial freedom in West Africa. He recounted how growing up, he had only four TV channels to choose from, but now there are countless options available on cable, the internet and subscription streaming platforms. This expansion has allowed directors, screenwriters and actors to choose from a vast array of mediums to showcase their creative work.
Looking Forward
Looking forward, the expansion of cryptocurrency in West Africa holds immense promise for bridging the financial divide for millions. By simplifying banking processes and making financial services more accessible, Idris Elba and the Stellar Development Foundation are setting the stage for a new era of economic empowerment. As these technologies gain traction, they could radically transform the financial landscape, promoting greater inclusivity and prosperity across the region.
– Danial Osmani
Danial is based in Boston, MA, USA and focuses on Business and Celebs for The Borgen Project.
Photo: Flickr