Scamlink Official :: Scamlink in Madagascar: A Step Towards Building Trustless Digital Environments in Africa
June 20, 2022Africa is standing at the cusp of digital transformation, witnessing exponential growth in digital currency adoption and internet penetration. This digital adoption is catalyzed by a myriad of reasons including limited protection against frauds in C2C transactions, higher cost of traditional escrow solutions, and insufficient banking infrastructure.
We analyzed the burgeoning digital trends across Africa in our previous post and in order to take our research a step further, we spoke to a prominent Web3 proponent and digital entrepreneur in Madagascar, one of the poorest world’s country with a population of nearly 29 million.
Princy Andrianjaka is an experienced entrepreneur and crypto-enthusiast from Antananarivo, the capital of Madagascar. Our discussion revolved around the economic, financial, and monetary difficulties Madagascar is going through. Princy also evoked the structural problems that entrepreneurs in Madagascar face amid the depreciation of the national currency, lack of trust in traditional institutions, and transactional frauds.
Hi Princy. As you know Scamlink is planning to launch a cryptocurrency marketplace with an escrow payment service that could be particularly useful in developing countries. We would like to know your feelings on the relevance and possibility of its adoption in Madagascar. But before that, can you introduce yourself?
My name is Princy and I am a Malagasy entrepreneur. I run several companies in different fields, one of which aims to provide initiation training on cryptocurrencies. My goal is to raise awareness among Malagasy people about the use and opportunity of digital currencies.
You have been working in Madagascar for several years. What are the difficulties a Malagasy entrepreneur faces when entering the digital sector?
In Madagascar, we are slightly behind the trend when it comes to using digital technology across our businesses.
While we have digitized bank accounts, accessing and using them is troublesome. If you want to open one of these accounts, you must be creditworthy, which is not easy for everyone. It is also challenging to receive foreign remittances as we don’t have access to payment methods such as PayPal or Stripe. Some of the traditional banking providers, French banks or similar counterparts, refuse to collaborate with Malagasy banks, making it challenging to handle international payments. In short, if you’re dealing with foreign remittances, your financial matters are always complicated.
Can you give us an estimate of the fees charged by banks for international transfers?
I would say that the fees range from 3 to 5% of the transfer amount, but that is not necessarily the most disturbing factor. What really impacts us is the constant devaluation of our currency, the ariary. While you can easily exchange euros for ariary but buying something in euros through a reverse conversion could lead to a 10–15% difference in the exchange rate.
What difficulties do you encounter with imports and exports?
Corruption is endemic in Madagascar. It is well illustrated in the import/export sector by the monopolization of economic organizations on certain high-demand products. For example, it is very difficult to obtain vanilla for export, even though it is one of our country’s flagship products, whereas imports are easily accessible. Additionally, there is a high taxation rate for products, standing at 34%.
Is it easy to open a bank account in Madagascar?
Yes, it is fairly simple if you’re solvent. It allows us to use automatic transfers when paying wages. However, the monthly charges for account maintenance are very high; about 20,000 aryaris, considering an average salary of 350,000 aryaris. It’s a substantial expense.
Two major elements seem to penalize Malagasy entrepreneurs; a constant depreciation of the currency and high entry barriers to the market because of corruption and market manipulation by a limited group of organizations. Is that right?
Indeed, these are two major obstacles that young Malagasy entrepreneurs encounter. For example, in western countries, graduates have the necessary financial support to achieve their objectives and execute their business ideas. Madagascar doesn’t have a similar support system that can provide the necessary financing to budding entrepreneurs. The only way to secure a line of credit is to offer collateral worth twice the amount of your loan. The lack of early capital is the Achilles heel of the Malagasy entrepreneurial ecosystem.
When we put in parallel the import/export problems and the poor access to digital payments infrastructure, we tend to think that C2C marketplaces should be dynamic. What can you tell us about this?
The only marketplace in Madagascar that is used, both in C2C and B2C, is the Facebook Marketplace; others are not operational. We can access Alibaba, Le Bon Coin, or even Amazon, but there are no reliable transit channels. If we buy a product on Amazon, we can never be sure that it will reach us because of the disorganized postal delivery system in Madagascar. And that is one of the primary reasons locals do not use these marketplaces.
Additionally, we’re cautioned against sharing/using our bank details on the Internet because of the lack of a secure authentication system for payments. Without a proper security infrastructure, Malagasy consumers feel insecure when making international purchases.
There is a fundamental problem with trust in shipping services and banking payment systems. So how does a C2C transaction work?
People meet in person if they live nearby. If one of them lives in the province, then they have no choice but to trust each other, i.e., hope that the buyer is honest when he receives the product. In case of fraud or litigation, it is possible to file a complaint, but there is no system to secure the payment.
Transactions are either in cash or mobile money. From what I have noticed, a growing number of Malagasy prefer mobile money instead of having a bank account. It is a way to make sure that we have control over our money using our mobile devices, and not at the bank which is less trustworthy. It is not uncommon to have network problems at banks. They can charge you twice for the same service and blame it on you for not checking the transactions. This is authorized theft. I personally try to stay away as much as possible from everything related to banking in Madagascar because of these malpractices by financial institutions.
If I understand correctly, in addition to the structural problems related to shipping and payment systems, there are strong trust issues in financial and monetary institutions in Madagascar. What about cryptocurrencies?
I personally use cryptocurrencies as a means of exchange and investment. It provides a simple and relevant solution for securing transactions in my case.
The biggest problem in Madagascar is the disbursement of cryptocurrencies. There is no exchange that allows a transaction between ariary and any cryptocurrency. So, I think that cryptocurrencies, given the financial and monetary issues faced in Madagascar, can be widely used by an informed population provided the access is made easier. Individuals can use cryptocurrencies for daily payments and even utilize staking rewards for regular expenses.
Scamlink is a crypto marketplace associated with a smart contract escrow service. What is your feeling about the implementation of this project in Madagascar?
I think this project can really work because Malagasy people are fed up with being ripped off by commercial banks and delays in international payments. For example, if I want to order a product on Amazon, I need to have a credit card that supports international payments through payment networks, such as Visa or Mastercard. And even then, making a withdrawal abroad costs me around 8–10% in fees.
If access to cryptocurrency investments and withdrawals gets easier in Madagascar, I think that Scamlink can take off, C2C being one of the preferred ways of disbursement.
The take-off of the Scamlink marketplace would then be intrinsically linked to the adoption of cryptocurrencies in Madagascar, especially as a means of payment, disbursement, and trust. Scamlink also provides a decentralized escrow service that utilizes a smart contract to hold funds and release them as soon as the transaction is approved. What do you think of such an innovation?
I think it is an essential innovation, especially when it comes to C2C marketplaces. Facebook marketplace, most popular among Malagasy, doesn’t provide an escrow service or payment guarantees, and in case of fraud, you’re restricted to filing a complaint. However, the police lack the necessary technical skills to apprehend these fraudsters.
In my opinion, if a marketplace offers an easy-to-access escrow system, people will adopt it. For example, if a customer wants to buy a product while he is in the periphery of Madagascar, the escrow service will safeguard funds until the reception of the product. This would be an important innovation in securing payments and reducing fraud.
How could Scamlink be implemented in Madagascar?
I think we need to take a long-term perspective. It is essential to educate Malagasy people progressively on the opportunities and functioning of cryptocurrencies. To integrate Scamlink, it is necessary to target a specific population that is already using digital currencies. At the same time, Scamlink should undertake educational work to provide easy access to cryptocurrencies to Malagasy people.
