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Unlocking Wealth for Africa’s Unbanked

Africa’s Unbanked

March 15, 2024 Commodity Vault

Unlocking Wealth for Africa’s Unbanked: How Tokenizing the Mining Industry Creates New Opportunities

Financial inequality in Africa is one of the biggest driving forces of poverty on the continent. People at the bottom lack access to key financial services and investment opportunities for wealth building, entrapping them in cyclical poverty.

But thanks to the tokenization of mining assets, new opportunities abound for Africa’s unbanked, as well as those without access to traditional investment platforms.

In this article, we explain how tokenizing mining assets can provide new and exciting wealth building opportunities for Africa’s unbanked.

We run through the benefits of investing in digital tokens and show how for Africa’s poorest populations, this could be an innovative way to build wealth, without the help of conventional financial institutions.

The unbanked in Africa – a lack of financial inclusion is driving inequality

Africa’s unbanked – meaning those without access to a traditional bank account – equate to at least 350 million individuals1. The majority of these people live day-to-day by means of cash transactions and lack the financial security of a basic checking account.

What’s more, Africa’s unbanked can’t access credit products that many other people use for wealth building, such as mortgages, investment accounts, and simple personal loans to acquire assets, land, and housing.

This lack of financial inclusion means that most impoverished people in Africa cannot adequately financially empower themselves. After all, it is difficult to build wealth without

1. https://www.africanenda.org/en/blog/2023/what-does-it-feel-like-to-be-unbanked

wealth, and many people across the continent live a day-to-day existence and struggle for survival as a result.

Though mobile money transactions are hugely popular, particularly in sub-Saharan Africa, there is potential for more transparent, equitable, and easy to access payment and investment opportunities across the continent, to enable impoverished people to invest in their futures and build wealth.

One of these opportunities comes from tokenizing the mining industry, to provide people throughout the continent with access to Africa’s abundant mineral wealth, as we explore below.

How tokenizing mining creates new opportunities for Africa’s unbanked

Research indicates that Africa is home to approximately 30% of the world’s mineral wealth, 40% of the world’s gold, and up to 90% of the world’s supply of chromium and platinum2.

In other words, Africa is a reservoir of many of the world’s most valuable and sought-after minerals, which are crucial in the production of technology, transportation, and practically every other sector on which the modern world runs.

Historically, only the wealthiest individuals in the continent (and further afield) have benefited from Africa’s exceptional mineral wealth.

The United Nations highlights the fact that Africa’s inability to harness the wealth generated by its abundant natural resources is one of the main reasons why so many people remain poor and without access to key financial services3.

Tokenizing the mining industry has the potential to create investment opportunities for the unbanked in Africa. It also provides regular, working class citizens with the opportunity to diversify their investments to grow their wealth in non-traditional ways.

Tokenized mining is the future of mining investment. It provides people with the opportunity to buy fractional ownership in mining assets such as gold, platinum, oil, and natural gas.

2. https://www.unep.org/regions/africa/our-work-africa
3. https://archive.uneca.org/es-blog/africa-must-benefit-its-mineral-resources

It offers a potential paradigm shift in Africa. Rather than only the rich and powerful benefiting from Africa’s abundance of minerals, everyday citizens, even those without bank accounts, can get a piece of the action. Let’s take a look at how it works.

How does tokenized mining work?

Historically, investing in minerals has been a strategy employed exclusively by the wealthy. This is because it has been difficult and prohibitively expensive for people to buy gold and other precious materials. Until now.

The tokenization of mining assets has given people in Africa and all around the world the golden opportunity to buy a fraction of precious minerals.

Today, it’s possible to buy a fraction of a mineral in the form of a digital token. This is possible because these digital tokens are created on the blockchain. Each token represents a fraction of the value of a real-world mineral, such as gold or platinum.

The blockchain is the same technology that powers and enables cryptocurrency, and tokenized minerals are a digital asset class that share some similarities with crypto.

Once created, these digital tokens are available for trade on digital platforms that are easy to access, removing the barrier of access that has historically been attached to investing in minerals.

What’s more, as these digital tokens are created and stored on the blockchain, they are extremely secure and tamper proof.

As a result, anyone with access to the internet and a digital wallet can now invest in mining tokens. This is hugely exciting for Africa’s unbanked, as well as people across the continent who are keen to diversify their investment strategies.

The benefits of tokenized mining to the unbanked in Africa

It’s fair to say that tokenized mining has the potential to be transformative across Africa. It breaks down the barrier to entry, enabling the very people who have historically been exploited by mineral production to access the value that they can bring.

Specifically, here are some of the benefits of mining tokenization to Africa’s unbanked:

Reduced barriers to entry

Africa’s unbanked find it difficult to access financial services as they struggle to complete the process and checks required to access a bank account. But to buy a mineral token, you do not even need a bank account.

Anyone in Africa with internet connection and access to a digital wallet can buy a token in a matter of minutes. This is perhaps the biggest advantage of tokenized mining, as it strips away the barriers attached to historic mining investments and makes the process much more accessible to all.

Wealth building opportunities for Africa’s unbanked

As mentioned earlier in this article, one of the main challenges facing Africa’s unbanked is the ability to build wealth, because it’s near impossible to access traditional financial services without a bank account.

But investing in tokenized minerals and building wealth through non fiat currencies like crypto presents Africa’s unbanked with a viable alternative. Though it may take some people a while to get their heads around the concept of tokenized mining investments, the potential for wealth building is obvious when the concept becomes mainstream.

A democratized supply chain

One of the most significant challenges facing the unbanked in Africa is that they struggle to access investment opportunities. This is because the minerals, power, and wealth, are the de-facto property of the wealthy elite in charge of running the country in question.

Tokenized minerals, once widespread, will democratize the supply chain and give everyone in Africa the opportunity to buy a slice of the action. This can transform livelihoods and may raise thousands or even millions out of poverty.

Enhanced transparency

Anyone who has invested in minerals will know that the entire process lacks transparency. Middlemen bump up the administration and facilitation costs, and there is a lack of transparency and regulation on the continent as a whole.

The very existence of blockchain-based digital assets is much more transparent, with reduced fees and much greater accessibility. If Africa wakes up to the transparency and efficiency offered by blockchain, it could be transformative for the entire continent.

Reduced transaction fraud

Mineral transactions are often fraught with fraud, insecurity, and a lack of transparency. This puts many investors off, as a lot can go wrong with high-stakes transactions.

But the introduction of digital tokens stored on the blockchain eliminates much of the risk of financial transaction fraud. This will breed confidence among investors and bring more people to the table when it comes to mineral extraction in Africa, which is good for the industry as a whole.

Recap: The potential of tokenized minerals for Africa’s unbanked

Though tokenized minerals are relatively new in Africa, the concept has the potential to be incredibly transformative. Given that so many people in the continent are unbanked, tokenized minerals break down barriers attached to traditional banking and investment opportunities, giving more people a seat at the table.

If impoverished people in Africa take advantage of the opportunities presented by tokenized mining, they have a new way of building wealth, without relying upon traditional banking institutions that have historically made it prohibitively difficult for them to access key services.

Thanks to the enhanced transparency and security of blockchain-based digital tokens, the tokenization of the mining industry is super exciting for all regular citizens of Africa. If countries within the continent are serious about embracing this new investment opportunity, the coming decade could see a significant transformation in the quality of their livelihoods as a result.

Other references

https://www.linkedin.com/pulse/unlocking-wealth-africas-unbanked-how-tokenizing-mini ng-industry/

https://www.linkedin.com/pulse/digging-digital-gold-unleash-power-tokenization-mining- asset-investment

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Tokenization as a cutting-edge technology that optimizes and simplifies the process of issuing corporate securities on the blockchain.

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