DeFi, short for Decentralized Finance is the use of applications and services built on blockchain technology to get access to financial services, such as sending and receiving funds, payments, investing, and saving without the control of a third party or centralised body.

In Africa, DeFi is liberating thousands of unbanked individuals, giving them access to financial services that traditional banks could not provide on a large scale. For example, to open a typical bank account, one has to be physically present at the bank, and have some specific documents.

However, it takes an Android/iOS phone or PC, and internet access to create a crypto wallet in less than 5 minutes. Imagine the time-saving and stress-free process DeFi provides - no paperwork.

That sounds like a dream come true right? In this article, we’ll look at DeFi, the impact it’s having on finance in Africa, and the platforms that are promoting its adoption.

Let’s dive in :)

Why DeFi

Finance drives economies, from banking, loans and investments. This is done by a central body that regulates the flow. DeFi is a decentralized approach to these services, powered by blockchain technology.

DeFi adoption and innovation is growing in Africa. DeFi is accessed through cryptocurrencies, which are mostly built on the Ethereum blockchain.

Gregorio Punzano, Founder and CEO at Koryntia, in his article on the importance of DeFi in Africa, noted:

“DeFi has the potential to create positive change in Africa as it can offer solutions to some of the problems Africans face in the traditional financial sector, such as a lack of inclusion, high inflation, corruption, regulatory barriers and the high cost of transactions.”

Bitcoin, Ethereum, USDT, BNB - these are cryptocurrencies that form the base of Decentralized finance. They are transacted on platforms like Binance that support the exchange of cryptos.

DeFi solves these problems:

Lack of Inclusion

One of the significant issues that DeFi addresses is financial exclusion. A report by The Fintech Times shows that 57% of the population in Africa are unbanked - as mentioned earlier, meaning they do not have access to banking services. DeFi, powered by blockchain technology, offers an alternative financial system. More people can now have access to financial services through DeFi applications.

High inflation

Inflation rates in African countries reduce the value of local currencies, which impacts their purchasing power. With DeFi, individuals can save their money in stable cryptocurrencies and convert it back when they need it. This reduces the direct impact of high inflation rates.

DeFi and You

DeFi is paving the way for a financially inclusive future for Africans. You don’t need to be a finance expert to make use of DeFi.

The 2022 Global Crypto Adoption Index, by Chainalysis, shows that Nigeria and Kenya, rank 11th and 19th as emerging markets adopting crypto and DeFi. In Africa, Nigeria has risen to spotlight status, as a top crypto economy.

Companies like Roqqu and Busha are building innovative platforms on the blockchain, enabling access to DeFi services.

If you’re interested in learning about DeFi trading, which is related to Forex but majors in the Crypto space, check out Decrypt. You can also connect with top voices in the African DeFi space like DeFi Princess and Xeusthegreat.

5 platforms promoting the adoption of DeFi in Africa

These platforms contribute to DeFi adoption in Africa by providing easier access to cryptocurrencies, educating users about DeFi concepts, and developing blockchain solutions tailored to the African market.

Xend Finance - Xend Finance, a Nigerian-based protocol is a global crypto bank, that offers up to 15% interest, and also an open Web3 infrastructure for developers.

Onboard - Onboard is a platform developed by Nestcoin that enables users to store and convert crypto assets to their local currency securely. There’s also a P2P marketplace for merchants to easily buy or sell crypto while earning profits.

Luno - Luno is a global cryptocurrency platform that enables Africans to securely buy, sell, and manage cryptocurrencies.

DeFi Africa focuses on creating opportunities for Africans to participate and benefit from decentralized finance solutions.

Roqqu - Roqqu is a Nigerian cryptocurrency exchange platform that enables its users to buy, sell, and save different cryptocurrencies.

Challenges in the African DeFi space

Despite the rise of DeFi, some challenges exist which certainly can be overcome. Some include:

Government regulations

Blockchain, web3 and DeFi are gaining massive adoption in African regions, however, African governments are still in the process of fully embracing and regulating these technologies.

In the midst of this, there has to be a balance - setting regulations that allow innovation to thrive.

Awareness of Technology

In the inner cities, where the unbanked are more prevalent, there’s a lack of awareness of new technologies. Promoting digital literacy and providing accessible educational resources are essential steps to address this challenge.

Internet Access

To participate in DeFi, access to the internet and education on blockchain technology are required. A report by the World Bank shows that only 22% of the population in Sub-Saharan Africa were using mobile internet services at the end of 2021.

Next Steps

As part of the tech wave, DeFi is bringing about positive change to the financial industry in Africa.

Yes, some regulations are yet to be put in place, but you can start educating yourself today. Despite the challenges, with proper implementation and adoption, they can be overcome.

To stay updated in the DeFi space - Do Your Research. (a phrase that is mostly said in the DeFi space)

Here are platforms you can access to get educated on DeFi and blockchain:

NODO - Powered by EMURGO Africa, NODO educates its audience on Web3/blockchain products and also discovers potential African projects in the Web3 space.
Binance Academy - Binance, a cryptocurrency exchange platform has a learning hub, that provides free blockchain and crypto education.

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