Elizabeth Rossiello - CEO and founder of Bitpesa

Elizabeth RossielloElizabeth Rossiello, CEO and founder of Bitpesa, talks about bitcoin in Africa. You will learn about how she is pioneering the deployment of Bitcoin in Africa.

Bitcoin greatly reduces the costs for securing and sending money. This has huge implications for the developing world. Many of these people have no access to financial services that those in the developed world take for granted and when they do the fees are really high.

Bitcoin is a powerful tool these people can use to lift themselves out of poverty. But before we get to the interview, this short video will help you see what is happening with Bitcoin in Africa.

### Interview with Elizabeth Rossiello


Interview with Elizabeth Rossiello on bitcoin in Africa

Trace Mayer:  Welcome back to the podcast.  We have with us Elizabeth Rossiello.  She is CEO and founder of Bitpesa which is doing some great work over in Africa.  Welcome to the podcast.

Elizabeth Rossiello:  Thanks.  Thanks for having me.

Trace Mayer:  Yes.  So, you actually have the longest flight here, 40 hours.  Good gracious.  You know, how do you get in the bitcoin, like what got you started in it?

Elizabeth Rossiello:  Sure.  Well, you can hear the flight in my stuffed up nose right now I endured from the travel, one of the hazards of being based in an emerging market where our team is.  I moved to East Africa in 2009 to work in micro financial services.  So I was working in investment banking before that and political economy before that.  I was kind of in the boom of introduction of micro financial services to the continent.

So a lot of money coming in from a lot of investors, a lot of governments, institutions trying to do micro loans, micro insurance, micro credit all over the continent.  We saw a lot of good things happen at that and a lot of crazy thing.  I guess it was its own little bubble and one of the really exciting things that came out of that was something called mobile money and mobile money is essentially domestic close-loop digital currencies.

Trace Mayer:  So, like M-Pesa.

Elizabeth Rossiello:  Exactly.

Trace Mayer:  To be an example.

Elizabeth Rossiello:  So, M-Pesa is the brand name of Vodafone's local subsidiary, mobile money.  And we also have MTN mobile money, Airtel money, Orange money or Tigo cash. Those are some of the mobile many providers that are active in sub-Saharan Africa, South-East Asia, South America also have different variance on that.  In what it essentially is is a pack store of value directly tied to the local currency back to pre-paying cash for.

So you can rock up to a local shop on the corner and hand over cash and get that equivalent out on your phone almost like a prepaid card, as if it's tied to your SIM card number and your identity.  So if you lose it you can ask the TELCO for another version of it.  And it's near free and instant to move it around domestically.

So when that kind of came out that really revolutionized the way financial services were rolled out, products were rolled out.  So it was almost kind of like a free bitcoin technology.  Only thing is its closed loop.  So it doesn't work across companies or across borders.  So we brought the idea of digital currency linking that to local kind of digital currencies, trying to make financial services that more international.

Trace Mayer:  And so, like what percentage of the Kenyan GDP would you say is being done with these digital currencies currently?

Elizabeth Rossiello:  Yeah.  I should actually know this number up ahead I see it all the time.  I think it like good 60, 70 %.

Trace Mayer:  Holly cow!

Elizabeth Rossiello:  Yeah.  I mean, a huge, huge portion of the GDP goes over this.  I mean, I don't touch cash anymore.  I use it to buy tomatoes.  I use it to pay for my kids' school fee tuitions.

Trace Mayer:  Coca-Cola.  Buy Coca-Cola.

Elizabeth Rossiello:  Coca-Cola, everything, paper hotel, flights, travel, I pay salaries.  You can pay taxes and parking tickets, police fines, everything in this money.  It's great.  It's a great way to get things done.  It's almost skipped over the legacy technology.

Trace Mayer:  Yes, so they've gone directly from like being in there grass huts --

Elizabeth Rossiello:  Cash.

Trace Mayer:  And cash.

Elizabeth Rossiello:  Well, that's crazy.  I mean, grass huts.  I'm that forest person in my neighborhood.  Everybody's driving an SUV, like living in condos.

Trace Mayer:  So, I mean people think that like that Africa is like the jungle, right or the Savannah. but people are actually like in SUV's?

Elizabeth Rossiello:  Yeah.  I mean Africa is not a country.  Africa is a very diverse continent that's enormous.  if you've ever seen the map, you see that like North America, Europe, Asia like fit into the African continent.  It was pretty crazy.

Trace Mayer:  Well, that's actually an interesting point.  It's which map.  Because like the longitude and latitude lines actually distort the size of North America and so most of the maps that North Americans see North America is actually a lot larger geographically.

Elizabeth Rossiello:  No, it's a tiny place.

Trace Mayer:  Because of that then what it is actually.

Elizabeth Rossiello:  Yeah.  I don't mean to speak for all of Africa, I mean, my specialty lies in East Africa and we launched in Ghana recently.  Certainly different markets in Africa are very different and I'm talking about Sub Saharan African.  North Africa a whole another animal.  But definitely, Nairobi is a boom town.  Inflation rose, I mean, this is like Hong Kong was 15 and 20 years ago.

I'm seeing sky scrapers, highways, huge pipelines coming in.  I mean, it's a very emerging middle class.  Everybody wants to buy stuff online and pay for things and they don't have always the right tools.

Trace Mayer:  Yes.  It's kind of funny I actually had a roommate from Brazil and people would kind of joke like well, what it's like in Brazil?  He is like well, we live up in the tree huts and like we swing around on vines.  Like people who haven't traveled just don't really understand what it was like in a lot of these parts of the world.

Elizabeth Rossiello:  People have no clue.  I mean, the diaspora which is the population that lives aboard from the region, they're like highly educated, wealthy individuals.  So it’s not like someone coming up to a room and is counter paying couple of pennies.

I mean these are Oxford Ivy League grads running really successful businesses who are putting their profits back into real estate.  I mean, I think that's a real disservice to say that and a lot of people who say how cool you're during an African business, oh, you must be so proud of yourself.  You know I'm not vaccinating orphans.  I'm a profit --

Trace Mayer:  I'm over there to make some money.   Elizabeth Rossiello:  I'm a for-profit business in a booming economy.  I'm part of one of many in an emerging kind of eco system of startups.  So it's an exciting place to business.

Trace Mayer:  Yeah.  Actually, I had a friend who went over to Rwanda to buy some real estate.  Because if you have economic growth that's taking place this type at a rate and you're going to have currency appreciation because of some of this.  I mean, you could really have a multiplied return especially on real estate.

Elizabeth Rossiello:  Yeah, I mean.

Trace Mayer:  From these types of geographies.

Elizabeth Rossiello:  And people are.  I mean, there is a ton of money being made.  I mean, honestly I think there's a lack of familiarity with Americans, I mean, from East Africa because of the political conflict we see in Somalia, kind of like it turns everybody off to the region.

But if you look a kind of even a tourism boom which is a big chunk of the economy.  Everybody on the coast of Kenya is from Europe.  I mean that's kind of like the Caribbean for a lot of Europeans.  So there's a lot more familiarity from Europeans because they just happen to travel more frequently.

Trace Mayer:  Now, if bitcoin gets accepted over here, you know, and we're not using the closed loop systems.  We're actually using a protocol that would be interoperable with our other systems.  Much easier, you know, we got like Coinbase etc. that makes it interoperable with ACH.  Then, you know, my buddy who's the real estate investor, he's tenants could be paying rent with bitcoins.

Elizabeth Rossiello:  Sure.

Trace Mayer:  Very easily, right?

Elizabeth Rossiello:  And that's what we're doing.  Right now we're bringing in on boarding ramp over there by making a market in local fiat.  So are making a bitcoin price in local Kenyan shillings, in Ugandan shillings, Tanzanian shillings, like that's my business right now is make that market and then to do last mile payment collection and delivery.  So we make it really easy, fast and quick for people to buy bitcoin and for people to sell their bit coin.

Trace Mayer:  Let's take real estate as an example.  When we want to do a valuation on the real estate.  When we've got all the transactions and the rent roll going on on the block chain or in, you know, our venture capital investment that's going on over there, 80 or 90% of the revenues are on the block chain.  All of a sudden it's a whole lot easier to kind of understand the economic activity that's going on and for investors to actually be allocating capital to those types of project, right?

Elizabeth Rossiello:  Exactly.  I mean, as I said before diaspora who are familiar with the country who have moved abroad there's a huge desire to invest in real estate.  It's an asset that a lot of Kenyans specifically and I'll speak I live in Kenya right now truly the door and they have these kind of investment groups called Chamas.

So you'll see a large group of Kenyans in the UK having an investment group which invest in real estate and for them it is hard to kind of monitor the investment and to gather funds and when I say hard, I mean, a little time consuming, expensive with all the fees to transactions, I mean, monetizing that into making the payments happen over a decentralized currency where you can monitor.  Blockchain is a radical stuff.

In fact there is a company called Chama Pesa, good friends of ours, who are using the Ricardian method or Richadian contracts to kind of digitize all those transactions in the investment group.  So, there's a lot of practical applications where you can get a skip over any sort of legacy technology that never really occurred.

Trace Mayer:  So when we're talking about like an investment group, I mean, imagine if the apartment complex were issued some type of a colored coins types of situation that could trade around with the diaspora and the rental dividends or payoffs that could be made.  We'd know exactly who to pay and how to do it and we're collecting all the funds.

Elizabeth Rossiello:  Sure.  And then on Bitpesa of course we have like a multiple pay out options.  One of the new features we'll be launching soon is kind of a organizational payments that you can upload a salary pay roll for like 50 to a 100 people.  Give me all their mobile phones numbers and the amount of salary and the day you want to pay it out and we'll do like a lump sum payment with one bitcoin fee.  And we can do that for invoicing, for suppliers, deliverables anything like that.  So we're trying to make it very easy for organizations to get in and out of bitcoin.

Trace Mayer:  What other types of daily use cases like client use cases could we be looking at?  For example, I was watching Bloomberg and there's this new kind of solar panel company over there.  Maybe you could describe that and like how bitcoin could be applied to these types of use cases and how they could actually make things a lot more profitable and seamless and slick and maybe even have a charitable aspect too.

Elizabeth Rossiello:  Sure.  M-KOPA has a SIM card embedded in the solar home units that they sell.  So, just like a good old fashioned lease to own or a lay away plan, people can purchase a solar home system to power their TV, their generators, their lighting system in their home and then they pay monthly installments via this mobile money and if they don't pay the system gets shut down and if they do pay the sim card turns the system on.

And you can make a payment like a micro payment at any given time to let that happen.  It's a really great and a lay away plan.  Now, this works great within Kenya, where it's a closed loop plan, but every time this company goes to a new country they've got to integrate with that local mobile money.  I mean having a one unifying mono currency of course helps companies works across borders.

And then when you talk about a remittance place so people from abroad paying solar utility bills.  It easiest for them to send it over in one mono digital currencies.  So, I think internationalizing, getting out of these closed loops is where you really start to see digital currencies add value.

Trace Mayer:  We kind of hit on it a little bit earlier with property rights and real estate.  Hoppin Gizman wrote about how property rights are really what laid the foundation to prosperity.  So and Greg Maxwell, he's talked about kind of trying to abstract away the control of the ASIC mining hardware and tying it so that it only mines according to instructions given to it that have been signed by a particular private key.  That way we can still have centralized physical mining capacity but it's still decentralized in terms of the ownership, because being controlled by the private keys.

What about the internet of things?  What about investments?  Solar panels that could be controlled by private keys in the bitcoin networking transactions that take place or maybe even a real estate like locking or unlocking the door.  Things of this nature.  Do you see that as being a potential area for bitcoin companies to innovate and for investors to be allocating capital in order to generate more wealth and prosperity in these developing markets?

Elizabeth Rossiello:  Yeah.  I mean, sure.  I mean, and the biggest use case I see right now is there's a big divide in between what individuals believe they own and then what the government acknowledges that they've owned.  So often you have --.

Trace Mayer:  And are you talking about in Africa or just worldwide?

Elizabeth Rossiello:  I'm talking about in two countries like maybe Kenya and Nigeria for example.

Trace Mayer:  Because we have the same problem with hypothecation, re hypothecation in the Western developed financial systems.

Elizabeth Rossiello:  Yeah.  Exactly.  Let's talk about Kenya and Nigeria for example.  Kenya specifically, we have a bit land grab problem is with they call it.  First of all, as a non-resident I can't really own a lot of different properties.  I can get like a 99-year lease and when the government sign a new constitution a lot of property was retaken or reclaimed as we see in Zimbabwe and some places in Southern Africa like the reclamation of property owned by non-nationals and then even nationals.

There was just a big problem in Kenya with a school, came back from their school break and the playground had been co-opted by government official and will be made into a road.  Pieces of one of our airports in Nairobi were being slowly taken over so that the end of our runway is now a residential development and I mean, this make no kind of sense.  But who's going to fight the land rights and who is to say who owns what?

I mean, without the rule of law in some places or without really an ability to prosecute certain authorities it's really hard to kind of approve land rights. When 10 people hold the same land deed, how do you guarantee that, you know, you're the true owner?  So something like a blockchain where, you know, it's a public record where it's not a problem of both the buyer and the seller gaining trust.

This is both the buyer and the seller agree, but it's like a third party with potentially more political powers suddenly coming into the equation and decided they own the property or want to take the property and not acknowledging the rights.  So if had kind of a mutable kind of record that actually is a huge deal and something that could really help disrupt the local market.

Trace Mayer:  Yeah, I know.  Actually when I interviewed Jim Robinson from RR&E.  He told a story about someone from New York State government who the biggest pain point is, he gets about hundreds of calls a week where people can't find their mortgage to their house and so having a canonical version of who owns what land has application not just in the US, not just in New York, but also it sounds like over here in Kenya.   Elizabeth Rossiello:  Yeah.  Oh, for sure.  I mean.

Trace Mayer:  And yet it's the same type of software could power both.

Elizabeth Rossiello:  Yeah, exactly.  I mean, it's very amazing.  I mean, it's very easy to get a official looking document.  It's not always easy if someone contest that document to prove that it's authentic.  Even if you jump through 12 hoops to get it, you know, somebody else could have jumped through the same 12 hoops or not.

So, I mean, you know we had the time with IP right now.  We had another webstie that's copying us quite closely and we could take out patent how would we enforce it.

Trace Mayer:  Right.

Elizabeth Rossiello:  I mean, sometimes it's easy to go through the legal process so when it come to like enforce those rules.

Trace Mayer:  So what are you kind of most optimistic about over there in Africa?  Like what projects like, I mean, we're talking about changing the lifestyle of an entire generation in such a fast time period.

Elizabeth Rossiello:  Right.

Trace Mayer:  Like really raising standard of living.

Elizabeth Rossiello:  So, okay.  I'm not going to over reach and say I'm going to solve a continent's worth of problems because there's a lot of smart people thinking about that, a lot of money go into that.

But I will say one thing, I mean, high speed internet has just come to the region a few years ago.  People thought it was going to become one of the call center heads of the world.  Because it's Anglo and East Africa and it's in the same time zone as Central Eastern Europe.  But the high speed internet brings opportunity to a lot of people.

A lot of young people coming into school who said I never knew about this or that until like there was access to the internet and finally able to kind of meet my tribe online.  You know, or learn the skill that I didn't know about or get opportunity to do things that are not available to me locally.

And I think the coolest thing that I see is people buying bitcoins to pay for their servers, to pay for like access to website domains, to start their businesses, to pay for simple basic technical infrastructure, to get going and to get connected.

I think what bitcoin let's them do is participate in a global commerce.  Specifically for like technophiles or young developers to start that middle lay of that eco-system so they can help build companies that service their own communities.  So, just getting access to that infrastructure.  You can buy an Amazon AWS server without international credit card which a lot of people don't have and bitcoin has allowed that through gift.

Trace Mayer:  And even if they do have, a third of the transactions are fraudulent that come out of Africa.  So, nobody really accepts payments from Africa anyway.

Trace Mayer:  Yeah.  I mean, my own credit, every time I make a payment and, you know, we're a reputable business, I have to call my bank from each store and say I'm about to make a payment, are you guys ready for this.  And then you make the payment and they call you back and was that you.  I said yes, it was.  I'm basically on phone with them every time I make a payment with credit card.

So for me I'd love paying in bitcoin for travel through Expedia or like CheapAir and when those guys don't offer me the itinerary I'm really struggling.  I say cash in an envelope to a travel agent or try to use my credit card, which has a very low limit.  I'm stuck in a lot of ways and I'm a privileged international with accounts in several countries.

Trace Mayer:  And identity.  I mean, you actually have a birth certificate, right?

Elizabeth Rossiello:  Yeah.  I mean, there's birth certificates there, but I mean, I'm a multi-located American with a passport of international bank accounts and even I can't buy a plane ticket sometimes.  So, I mean, it's really hard for a 22-year old Kenyan, who has never studied aboard, who might have a birth certificate, might live in a nice house, might have a generator and internet access, but doesn't have that international financial buying power.

And I think that's the exciting part right now.  I mean, not to say that I support totally trickledown economics, but I do like to see infrastructure being built and payments the first thing to help finance that infrastructure.

Trace Mayer:  Yeah.  And there's so much opportunity for people over there that just didn't exist 30 years ago.  You know, we can get $100 tablets, we can get internet access.  They can go to Khan Academy.  Get access to all the best learning in the world for free.  Then they could search tutoring people via Skype and making money.

Elizabeth Rossiello:  Exactly.

Trace Mayer:  I mean, they have a lot to contribute to this world.  We know the distribution of I.Q. is the same there as here, right?

Elizabeth Rossiello:  Yeah.  And it's funny like a big chunk of our users are people of academic writers, like writing terms papers and academic papers for lazy American students.

Trace Mayer:  Doing their homework.  Getting paid for it.

Elizabeth Rossiello:  Pretty much.  Getting paid to do the homework and it's so funny.  And, you know, we speak to derogatorily about this population I'm like, "They are writing the papers for our children."

Trace Mayer:  Making them look smart.

Elizabeth Rossiello:  That's like my favorite story.  I mean, these academic writers are like, "Oh, my god. These homework assignments are so easy.  These lazy American students."  And, you know, they're getting paid in PayPal or they 're getting paid in other currencies and enabling global business in a lot of different ways.

Trace Mayer:  Parents beware.  Your kid might be outsourcing it somewhere to Kenya.

Elizabeth Rossiello:  They are.

Trace Mayer:  And paying with bitcoin.

Elizabeth Rossiello:  It is not might.  They definitely are.  They do 50 different academic writings.  So, I mean, it's an interesting place to see, to see it growing.  Our good friends at Python Development Academy in one of the slums and one of the bad neighborhood and they're like teaching really young high school kids and really college guys on Python.  And it's really great.

Trace Mayer:  Yeah, I mean.  I actually edited a book, Bitcoin for Kids, written by like three sisters that were 12, 13 and 14.  And they highlighted a Dutch kid in their plasmotech who's done a bunch of programming for Bitcoin like Python programming and somehow been able to accumulate 1500 bitcoins which is over a million dollars.

It's like a 13-year-old kid now, but a kid in a slum in Kenya now has the opportunity to accumulate wealth, store it, in something that's got the most security in the whole world.  You know, a supercomputing network backed by mining capacity that's 60,000 times greater than the 500 largest supercomputers combined.  I mean, his capitals are now safe.  It's not going to get stolen by the local warlord.  It's not going to --.

Elizabeth Rossiello:  Or devalued with deflation.

Trace Mayer:  Or devalued.

Elizabeth Rossiello:  I mean, the problem is that kid probably doesn't have a cheap data or maybe a computer.  Maybe he has at school, maybe he has it at dev school that my friends have set up and some others ways.  I mean still the people with access to data, I mean, data still like relatively expensive.  I paid about $50 for unlimited data a month. It's not that big of a deal but to some people.

So, it is a bit exclusive still.  You definitely don't have free Wi-Fi spots and hardware is expensive to come by and you don't get the best brands over there.  But it's getting there.  Cheaper data is coming.  I mean, I certainly in the last two years have seen my taxi drivers are now Whatsapp-ing me.

And, you know, a gardener that works in our street has constantly putting Facebook photos up every time he does something cool in the garden.  So, you're starting to see the trickle down in the urban areas and then it'll move to rural areas.  Google has been a big influence in the region.  Electrifying cities and putting out hot zones.  So, it's coming.  The data is coming and it's a big turning point

Trace Mayer:  So we're going to have billions of people come online, add their skills and talents to the global economy.  Bitcoin is going to be the language of money.

Elizabeth Rossiello:  Yeah.

Trace Mayer:  But they're likely going to be speaking because it's inter-operable.

Elizabeth Rossiello:  Right.

Trace Mayer:  As opposed to these closed loop systems.

Elizabeth Rossiello:  It's the internet money, right.

Trace Mayer:  The magic internet money.  This has been great.  Thanks for taking the time with Elizabeth Rossiello, CEO and founder of Bitpesa doing a wonderful work over there in Africa.  Thanks for being on the podcast.

Elizabeth Rossiello:  Thanks for having me.

Written by Elizabeth Rossiello on March 26, 2015.