Dotting the roadside in what is widely considered Africa’s largest urban slum are typical stands selling vegetables. What isn’t typical is their acceptance of bitcoin as a form of payment.
Around 200 people use bitcoin in Soweto West, a neighborhood of the Kibera slum in Kenya‘s capital. It’s part of an initiative to extend financial services to one of the country’s poorest and most under-banked areas.
Its promoters say the adoption of crypto fits with the ideals of bitcoin as an accessible, democratic technology — but experts say it also has major risks.
Bitcoin came to Soweto West via AfriBit Africa, a Kenyan fintech company, through its nonprofit initiative to improve financial inclusion.
“In many cases, people in Kibera do not have an opportunity to secure their lives with normal savings,” said AfriBit Africa co-founder Ronnie Mdawida, a former community worker. With bitcoin, “they do not need documentation to have a bank account … that gives them the foundation for financial freedom.”
Bitcoin, the first and largest crypto, was created in 2009 in the wake of the global financial crisis as a decentralized digital asset that could act as an alternative method of payment.
The asset has found more popular use as a store of value, like a digital form of gold. Bitcoin has attracted enthusiastic supporters as prices have climbed almost 1,000% in the last five years. But its volatility and lack of regulation are concerns.
AfriBit Africa introduced bitcoin into Soweto West in early 2022 through crypto-denominated grants to local garbage collectors, who are often funded by nonprofits. The groups are made up of dozens of young people, who Mdawida says are more likely to be open to new tech.
After gathering on a Sunday to collect trash, garbage collectors are paid a few dollars’ worth of bitcoin. AfriBit Africa estimates that it has put some $10,000 into the community, with garbage collectors acting as the main agents of spreading bitcoin in Soweto West. In Kibera, many people earn about a dollar a day.
Now a small number of other residents hold bitcoin, and some merchants and motorcycle taxis accept payments in crypto.
Damiano Magak, 23, a garbage collector and food seller, said he prefers bitcoin to M-PESA, the ubiquitous mobile money platform in Kenya, because M-PESA transaction costs are higher and the network can be slower.
There are no fees for M-PESA transactions between individuals or businesses up to 100 Kenyan shillings (78 cents), but after that the fees increase with transaction size. Fees for the Lightning bitcoin network where transactions take place are free if people use a platform that AfriBit Africa introduced into the community.
Onesmus Many, 30, another garbage collector, said he feels safer with his money in a bitcoin wallet instead of in cash because of crime.
Some merchants have found benefits to accepting crypto, including Dotea Anyim. She said around 10% of customers at her vegetable stand pay in bitcoin.
“I like it because it is cheap and fast and doesn’t have any transaction costs,” she says. “When people pay using bitcoin, I save that money and use cash to restock vegetables.”
The possibility that crypto prices could keep rising also appeals to residents of Soweto West. Magak and Many said they now have around 70% to 80% of their net worth in bitcoin, a far higher level of exposure than most people.
“It is my worth and I’m risking it in bitcoin,” Magak said.
That concerns Ali Hussein Kassim, a fintech entrepreneur and chair of the FinTech Alliance in Kenya.
“In an extremely volatile asset like bitcoin, it’s overexposure. I can’t afford to lose 80% of my wealth. How about a guy in Kibera?” Kassim said. “You are exposing a vulnerable community to an ecosystem and to financial services that they can’t necessarily afford to play in.”
Kassim acknowledged the potential benefits that digital assets could bring, particularly in facilitating cheaper cross-border payments like remittances, but failed to see the benefit in Kibera.
Bitcoin’s volatility could negate the benefits of cheaper transaction fees, Kassim said, and bitcoin does not have the same protections as other financial services due to a lack of regulation.
Mdawida disagreed, calling bitcoin’s unregulated nature a benefit.
“We don’t shy away from the risks involved,” the AfriBit Africa co-founder said, noting the group’s investments in bitcoin education in Kibera, including financial literacy training and crypto courses in the community.
Efforts to introduce bitcoin into developing countries have faced challenges. Bitcoin was adopted as legal tender in El Salvador and Central African Republic but both countries have reversed their decision.
In Kenya, the digital asset sector has faced legal and regulatory challenges, including crackdowns on cryptocurrency giveaways. This small project, focusing only on Soweto West, has been allowed.
“On my phone I put notifications on when bitcoin rises … and it’s all smiles,” Magak said. “Whenever it fluctuates up and down, I know at the end of the day it will just rise.”
