The Poor Culture of Savings in Africa: Will Bitcoin Adoption encourage savings?

One financial practice that serves us well as we grow old is the habit of savings. It is imperative that one saves a little of whatever amount he or she makes from any economic venture that he or she is involved in. Savings is a good practice since one can never foretell what might happen in the future. Accidents happen which can lead to long periods of hospitalization and possibly paralysis, people are laid off from their jobs day in and day out, as well as a myriad of unforeseen circumstances that can keep people out of jobs for extended periods. In such times where an individual does not have a job, having some savings comes across as a great benefit and can financially support a person while they are unable to work.

Over the years, workers in African countries have been advised to save a portion of their wages and salaries for future use. But for some reason, this advice does not seem to resonate within the continent. Every year, there is talk of how the people of Africa have a poor savings culture, the effect of which we see in the form of underdevelopment and a consistent reliance on donor partners to come to our aid. Public and private savings is minimal, almost negligible, in most African countries.

In his book “Why Africa Fails; the case for growth before democracy” Elly Kamugisha explains this theory in further detail:

“A higher propensity to save results in a lower propensity to consume. For most Asian countries, savings form about 20 percent of one’s income. In Japan it is about 18 per cent; and less than 5 per cent in Africa. According to Bloomberg’s Business Week, China has one of the highest savings rates in the world, at 38 percent and India at 34.7 percent. Therefore, during the process of economic growth and poverty reduction, individuals require a culture of saving and investment, as shown by China, India and Japan. Based on the average savings rate in Africa, it is obvious that a poor savings culture has negatively affected the economic performance of some African countries. They have, therefore, been left behind other developing countries in Asia and Latin America. Africa should therefore adopt a culture of saving for the future. Investment is facilitated by savings. A starting point is for government to initiate an aggressive campaign to encourage locals to save and invest”.

Considering Africa’s state when it comes to the issue of savings, the question that begs to be asked is, how one can save and invest when incomes that come to the individuals pocket and revenues the state generates is not enough for current expenses, as it were. How can one save when revenues and resources available to the person merely cater for the basic necessities? For many, it becomes seemingly impossible to save, hence the high interest for personal loans as well as the staggering coupon rates governments across the continent have to pay when they go in for external bonds. Savings and investments are also pertinent issues for stakeholders such as banks and finance houses in African economies. Banks and finance houses encourage their customers to save by going on marketing campaigns that purport to award prizes for their customers who are able to keep a certain amount of money in their accounts for a period of time. Banks and finance houses grow based on consumers deposits that sit with them, and they take a cut on the returns on these deposits by loaning it to governments in the form of treasuries and bonds.

Looking at savings in a wider perspective shows that anyone who saves stands to benefit in the long term. Individuals benefit by having access to emergency funds and possibly a return on investment, and government benefits in terms of a reduced balance of payment deficits and a stronger chance of rebound in the event of an economic downturn. Businesses, likewise, can make use of savings by expanding infrastructure which could not be done in the short run. Expansion means more jobs, which bring about high tax mobilization and an improved standard of living. The benefits of saving are innumerable; therefore, what could possibly be the reason why savings and investment culture is still low on the continent of Africa?

One way by which the poor savings culture can be tackled, especially in the private sector, is by streamlining the movement of money and capital. There must also be a conscious effort to redefine money not only as fiat but with an inclusion of alternative currencies such as the bitcoin. It is quite a sight to see consumers waiting in long queues in order to save their hard earned money. Such practises deter consumers from saving a portion of their income because they do not see the need for going through so much stress just to save at the bank. Bitcoin presents a perfect blend of technology and currency where consumers can store their wealth and access it at any time they desire. Savings should be structured in such a way that it is seamless and an integral part of a consumers routine. Bitcoin developers have developed systems which allow consumers to save in easier and more convenient ways. Emails, text messages, and a mobile platform are part of our everyday lives and are central to the way bitcoins are stored. An adoption of Bitcoin will let workers save without them knowing it.

Bitcoin can also efficiently streamline the movement of capital in a massive way. There are millions if not billions of idle funds all over the world. Investors in developed economies are looking for business with sound management and a bright future to invest idle funds in. Capital injection and financing is key to business growth and development, therefore, massive capital transfers to Africa powered by Bitcoin can lead to increased productivity and wealth. Bitcoin adoption can also lead to a boost in business sectors such as web development, editing, design, etc., which can allow users access to other streams of revenue apart from their traditional revenue sources.

Savings is a key component of growth, capital is a key component for business, and bitcoins can play a key role in merging the two for a better Africa.

Kwaku Abedi

Kwaku Abedi is a freelance writer/editor based in Accra, Ghana. He has an interest in Bitcoin and writes on bitcoin integration in Africa.

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The number of people who shop online for various goods and services continue to grow every day. Online shopping is set to disrupt traditional retail in a massive way and poses as a high revenue generator for retailers. This is because the advantages that go with shopping for products on the Internet via a smartphone or laptop are innumerable. For one, customers can sit in the comfort of their homes and place orders for goods and services. They are under no impulse to buy; therefore, they can take their time and review prices for goods, compare prices with competitor offerings, and read recommendations from other customers who have used the products. Online shopping works for a wide range of goods in the food, hospitality, and service industries. It is quite common to see customers booking appointments online for a masseuse or a barber.

Granted, this has been done for years in developed countries but in emerging markets such as Africa, the opportunity for clients to buy products online is a novelty in most countries. Shopping for products online also saves customers the cost and energy he/she would have used in going to the store. Some retail outlets also allow their clients to shop online for the types of merchandise that they would like, and then do an in-store pickup.

This shopping phenomenon has become somewhat of a craze in Africa; for example in Ghana, it is not uncommon to see a motorbike branded with the name and logo of a restaurant, supermarket or a clothing shop weaving its way through traffic to make a delivery to a client. In a country where the address system is near abysmal and directions to specific locations are centred on popular landmarks such as a hotel or football field, these delivery people know their way around the city, indeed. Delivery guys are in constant communication with their clients in order to give them specific directions to their various homes and offices.

One might ask why retailers bother to go through all that hustle, considering the fact that consumers will equally patronise if there was no delivery service anyway? What most retailers have come to realise is that online shopping and delivery of products is the new frontier when it comes to retail on the continent. Therefore, it is fairly easy for a competitor to gain more market share by adding this extra service. The business of delivery has also generated employment opportunities for unemployed youth since certain logistics companies handle delivery operations for businesses which do not have their own delivery structure.

The next logical step after showing an interest in a product online is the question of how consumers will pay for the product. When it comes to how online shoppers in Africa pay for their merchandise, it usually has do with paying upon delivery. But other retailers have partnerships with international payment platforms such as Visa and MasterCard in order to process payments for people who pay for the goods online. It is a known fact that payments via this method come with interest and commissions. In this regard, the unbanked population, which forms a large majority in numerous African countries, cannot take part in this efficient and simple retail network. In some cases, people who have bank accounts are not allowed to access cards due to low credit rating and a failure to meet other petty minimum banking requirements. A more streamlined and hustle-free payment process needs to be set up in order for the unbanked populace, which does not have cards and does not keep cards at home, to partake in this growing business.

The dream of most retailers and business owners is to serve a large number of clients at a fast rate while making decent profits. One way the retailer can do this is via the employment of Bitcoin. Encouraging payment via Bitcoin on the retailers’ part is another method they can employ to gain market share and, in effect, make more revenue. For one, a business owner who is open to accepting bitcoins as a standard form of payment can do business with basically every living human being on the planet. In so doing, his or her business is not restricted to Africa alone but becomes open to Europe, America, Australia, etc. If online sales and deliveries are powering a new wave of consumer demand, then Bitcoin is taking such transactions further by really simplifying the payment process for both the seller and buyer.

In virtually every country, there exists an international door-to-door shipping agency that would be willing to ship goods from a retailer’s home country to another location across the globe. Entrepreneurs who have goods for sale in that regard can propose to split the cost of shipping fees or arrange some form of delivery schedule in order to do business with their clients. The employment of Bitcoin and its block chain technology in business payment processing will open up a different market to the entrepreneur. In addition to card and cash options, business owners and retailers can add bitcoin payments to the ways customers can settle their debts, and compare how simple and efficient bitcoin is alongside the other payment options.

Bitcoin awareness, as a great payment advantage, continues to grow every passing minute and has a true potential to revolutionise the way online payments are carried out — especially on the continent of Africa, where retailers and business owners are taking gradual steps to integrate online sales into their structures to make it as simple as possible and give customers a consistent retail experience.

Kwaku Abedi

Kwaku Abedi is a freelance writer/editor based in Accra-Ghana. He has an interest in Bitcoin and writes on Bitcoin integration in Africa.