By providing a banking alternative and a reliable record of land ownership, blockchain technology could be used to improve the economy in Sub-Saharan Africa. Access to saving and transferring money and reliable land ownership records are two areas that are important to economic growth where Sub-Saharan Africa is lagging behind the rest of the world. Two reports from the World Bank support this hypothesis.
First, as a banking alternative. According to a 2014 report from the World Bank (the most recent data available), only 29% of the Sub-Saharan population has a bank account. The world average is 61%. The same report shows that a whopping 12% of the population has a mobile payment account – the world average is 3%. So few people with bank accounts and so many with mobile-payment solutions in their pockets makes this population the most mobile-payment friendly contingency on the planet.
The need for quickly and safely sending money to family and friends, as well as the ability to easily pay for goods and services has driven the demand for mobile-payment solutions in the region. This demand is supplied largely by Vodafone’s M-Pesa offering in the region, first launched in 2007, and has seen many entrants into the rising market since. To give you an idea of the size, in 2013 it is estimated that approximately 25% of Kenya’s GDP went through M-Pesa (The Economist, 2013). The steps from mobile-payment to digital currency is a much shorter leap than stepping from a bank account and credit cards to digital currency. Both entail using a mobile device to send/receive money and have electronic wallets that can be exchanged with cash at given locations, in addition to linking the electronic wallet to debit/credit cards and bank accounts.
Because a cashless payment system already exists, it could be considered competition to blockchain digital currency solutions. For the opportunity to improve land ownership and access records, there is no current competition to what blockchain technology could provide. According to Hernando de Soto in The Mystery of Capital (and many other authors), land, and the equity growth that comes with it, creates the possibility for more people to build equity and participate in the economy. The more people that actively participate in a capitalistic economy, the better it is for the economy in general.
In 2015, the World Bank released the Smallholders’ Land Ownership and Access in Sub-Saharan Africa report. According to the report, in Sub-Saharan Africa today, the formal systems for tracking land ownership and access are cumbersome and unreliable. Citizens commonly resort to informal ownership/rental/leasing agreements, which allows for corruption and creates barriers to economic development. The authors state: “land markets will operate more smoothly if clear information on land ownership is available at low cost and social norms ensure that a landlord who temporarily transfers land through rental does not risk the loss of this asset”.
They go on to argue that an efficient trustworthy record showing the history of land acquisition and inheritance, that shows associated rights and rental and leasing history, with a record of the finances of the transactions to ensure accuracy would improve the ability of the majority of Africans to engage in economically productive and life-enhancing activities.
When records are stored on the blockchain, there is immutable proof of every transaction on the blockchain. This means that once a record shows an individual owns a given piece of land, it would be available information that cannot be falsified. If land is then rented or leased, that transaction can be recorded, signed by both the landlord and the renter/lessee. Any disputes about who owns what, who rents, who leases, can be resolved by looking at the record of transactions on the blockchain. If this is implemented correctly it could meet all the criteria called out for in the World Bank report. Namely, it would be clear information, could be made available at a low cost, and transactions could be efficiently stored and accessed.
Inheritance is an important mechanism in Sub-Saharan Africa land-ownership rights. With the advent of smart contracts on the blockchain, it can be recorded by a land-owner while living how the rights of their land will distribute when they die.
The World Bank report goes on to say that if more people in Sub-Saharan Africa are encouraged to participate in the land ownership and access process by making it more accessible and efficient, and they are treated fairly in it, it will provide economic leverage for individuals, society, and whatever company provides the technology that enables it. Likewise, if more people can store and save money and participate in financial transactions without using cash, it will be good for the individuals, the society, and whatever company provides the technology that enables it.
Blockchain technology has the capability to enable both banking alternatives and be a reliable source of information on land ownership. Turning the technology into a solution that meets the specific needs is the hard part.