Bitcoin inclusion with focus on Africa

There has been a lot of buzz around what is going on in Africa in terms of Bitcoin adoption. A lot of truly inspirational grassroots stories are being told from the ground and the word is spreading. I’m personally really excited to be already involved in this movement (even still at an early stage), being on a mission to provide open financial services to the next billion.

A full disclosure: I am a co-founder of Growr (https://growr.xyz) and we are building a micro-lending protocol on top of Bitcoin, aiming to close the financing gap for smallholder farmers and micro-entrepreneurs by enabling access to a global marketplace for productive financing. We are currently working on pilots with local partners, such as helping 1000 farmers in Tanzania build their self-sovereign credit record and receive pre-financed inputs that increase their harvest. My financial inclusion story began about 10 years ago being part of a large multinational banking group with presence in many African countries, and continued while working at a financial technology company serving microfinance.

The following project ideas are naturally inspired by the Bitcoin inclusion stories from Africa and our past and current experiences. We will participate in both the Bitcoin Designathon 2022 and the Legends of Lightning, and we’ll select one or two of these ideas to further develop.

USD over USSD

Most African countries have been suffering from bad monetary policies and high inflation for decades. While it may seem counterintuitive at first, the US dollar is currently more appealing than bitcoin for the mass population, but they lack access to dollars due to currency exchange controls or lack of financial infrastructure. What if we can use the Bitcoin and Lightning infrastructure and provide access to accounts, sending, receiving and saving in USD, all through the default African super app—the USSD? Yes, we can—today. As Machankura has proven already in a record time launching in 9 countries as of the time of writing. We suggest using a similar approach and enabling a custodial Lightning wallet, coupled with a non-custodial stablecoin such as Dollar on Chain (DOC) available on the Rootstock side chain. We’d like to use a bitcoin-backed stablecoin, whose ownership we can demonstrate on chain for transparency purposes. Taro is an option here and we may use it to represent the asset on Lightning, but this is not a mandatory requirement—it’s more important to provide balance in USD and conversion between bitcoin and DOC. This will enable remittances over Lightning that are sent probably using Strike or a similar service and received in a USD-denominated account instead of local currency. Certainly, sending from Lightning to a mobile money account is also possible, as Bitnob recently demonstrated in Kenya. Despite its limitations, USSD enables 9 out of 10 mobile money transactions in Africa. We think it could be the key to a large scale Bitcoin inclusion of the population, even where traditional financial inclusion attempts have failed.

Argimint

A large portion of the African population is engaged in agriculture. Most of the people are organized in various forms of cooperatives such as AMCOs (agriculture marketing cooperative organizations), SACCOs (savings and credit cooperative organizations), VSLAs (village and savings association) and others. What might we do for these cooperatives? We suggest to build Agrimint—a specialized federated Chaumian mint (Fedimint) with a web interface for managing the activities of a cooperative—managing members, the cooperative treasury (bitcoin and USD stablecoins), member accounts and providing them with access over USSD (of course!). We can also bake in some micro-loans between the members, using their savings or from external sources. Fedi is already focused on solving community custody to reach the masses—we think that it would be even better to create a culturally & technically customized and localized experiences to be successful.

Lightning-based credit score

Which leads us to the topic of credit. The African unbanked and underbanked population is facing a huge financing gap due to informality and lack of infrastructure. The microfinance industry has focused on addressing this issue within the fiat system. What is we could fix it on top of Bitcoin and Lightning? We could build a service that uses the Lightning (or mint?) transaction history of a community or group of borrowers to analyze their creditworthiness. Most of the micro-loans are given to groups who share the risk, and we plan to replicate this here. But ultimately, this is very much applicable on a global scale for individual borrowers, too, if they can demonstrate their transaction history or let their merchant share it, for a kind-of buy now pay later experience for Lightning (read on).

Lightning micro-loans

Once we have a credit score, we can definitely apply it to provide micro-loans to pay Lightning invoices. But loans denominated in bitcoin won’t be very attractive—why not having a loan denominated in USD? A Lightning service provider could be paying the invoices, utilizing a USD (in fact DOC, the example for a stablecoin we already gave above) credit line allocated based on a borrower/group credit score. We can also bake Taro in to enable paying invoices in USD over Lightning.

As you can see, we believe that the technologies to expand the range of financial services on the African continent already exist on top of Bitcoin. This will drive the next wave of financial inclusion, or what we call the Bitcoin inclusion, in Africa and globally.

Please let us know what you think in the comments below—we’d love to have fellow designers and buidlers join us on our mission! Feel free to challenge us, improve on these ideas or just help us with feedback and encouragement. Thank you! 🚀