In an interview yesterday in Nairobi, Chief Executive Officer Elizabeth Rossiello revealed plans of Kenyan start-up BitPesa Ltd to reduce transaction costs of money remittances and reduce the processing time. Rossiello said the company will be addressing issues on money remittance services in Kenya via Bitcoin. Kenyans who work abroad send an aggregate annual amount of USD1.2 billion to loved ones at home.
Rossiello said, "There are no other market entrants trying to solve the problem of the very high cost of remittances in Africa."
According to the price database of the World Bank's Send Money Africa, Western Union and MoneyGram International Inc takes in USD10 to USD17 in transaction fees to wire USD200 from the US to Kenya. The two money remittance service providers also charge separate fees to exchange funds in local denominations, which usually takes from an hour to up to five days, based on the price database. BitPesa offers 3% on offshore transfers and claimed that customers in Kenya could remit the money the same day it was sent. Based on the rate, an offshore transfer of USD200 will only cost USD6.
Kenya is third-biggest recipient of remittances in sub-Saharan Africa, just after Nigeria and Senegal. More than 3 billion Kenyans who lived abroad send money back home.
Rossiello said BitPesa, of which Pesa is money in the Swahili language, was said to be engaged in partnership negotiations with two Kenyan commercial banks. The startup was also said to be mulling over a partnership with one money-transfer agent and at least one telecommunications company, said Rossiello. Rossiello refused to provide names of the companies the startup had been engaging with.
Nairobi-based investment company ICEA Lion Group research analyst Sarah Wanga said BitPesa needs to make a name for itself in Kenya first in order to be competitive.
"There is an element of reliability with banks, people have security putting their money there because it's what they are familiar with. But if this new system markets itself right, makes itself a household name, and it's cheaper, I think it could become a threat," Wanga said.
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