Excerpt
I met Jodom, the founder of BITSACCO, to learn how he’s combining Kenya’s traditional SACCO model with Bitcoin. Join me to explore how this innovative idea is transforming community banking and helping people save, access, and use money in exciting new ways!
Transcript
We are on the way to the center of Nairobi to meet Jodom, the co-founder of BITSACCO. BITSACCO is basically a community banking organization, and he is building one running on Bitcoin. We’re going to town now to meet him and to see how this is working. Okay, Jodom, you founded BITSACCO. Yes. Can you please explain what it is? Maybe you start with what is a SACCO because I have seen a lot of buses that are called SACCO. Yeah, that’s a very good observation. So SACCO is a model of banking where you have members come together. Essentially, they run a community bank. So this is the equivalent in different places in Africa and other places where the members of the bank themselves own the bank, compared to regular banks where you have shareholders and a board. So that’s a clear difference. Now, you see SACCO here. They’re formed for a very specific purpose. The example you gave is buses. We call them matatu SACCO, where matatus is like “public transport”. Members would come together, and they’ll have a mission like, “We’re going to buy a number of buses; we’re going to operate them.” That is our main business as a SACCO, right. BITSACCO is the same way, but the mandate, the mission of the SACCO, of the community bank, is to help the members of the community hold, access, and use Bitcoin. SACCO has a long tradition here, doesn’t it? Like also with regular money. Yes, let me give you the history of SACCOs, like from the get-go. Interestingly, this was a model that was invented in Germany. Oh, really? Yes, around 1978. Around the time that e-cash was also being invented. But yes, the model was invented for the reason that regular banks were charging high interest on credit, and they were not giving good service to the community because the incentives of the bank and the community were misaligned. So they formed this model where the community members can legally operate a bank of their own. So they have a lot of say in how the bank operates. Yes, and now this is very ubiquitous in Africa. So in Kenya here in Nairobi, where we are, there are all three levels of banking. There’s regular banks, which I just described. Then there’s mobile money, which is mobile money, but it’s as big as banks – in fact, even bigger than regular banks. Right in the middle, you can say between these two tiers, are the SACCOs. Yeah, so that is a footprint here and, I think, in other places in Africa. Now, tell our viewers, please, how Bitcoin comes into this solution. I mean, let’s hear from you: Why is Bitcoin important for Kenyan people? Yes, it’s an asset that has entered the market. People can access Bitcoin today, but it is really hard. Either you’re going to need some solutions for you to move from Kenyan Shillings to Bitcoin if you’re trying to buy Bitcoin. At BITSACCO, we think giving access to Bitcoin through a very familiar banking model like a SACCO is a big unlock. You know, we talk to users, and they’re like, “Oh, okay, I know what a SACCO is. I know how a SACCO operates. What is Bitcoin?” And it’s like, “Oh, it’s a new form of money. It’s a digital asset.” Right. And now you can access it through the trusted and safe mechanisms of a SACCO. Bitcoin is important in Kenya just like it is important anywhere else in the world because it gives you better security for your value. If you store it there, you know you can trust that value compared to if you have fiat and you’re worried about inflation and other issues. You have very high inflation here. Absolutely. How high is inflation? It’s over 17%. Yes, it’s very high, compounding annually. Yes. So you can expect it to be worse. Yes, very much so. And so you use the Fedimint protocol. Can you explain in an easy, understandable way what that is and what it does? Yes, well, the Fedimint protocol defines a way for a group of people to hold bitcoin together. Even more, it’s like just a subset of the group distributes the control of the bitcoin, but they can then scale that control and move decision-making to an even larger community. Mhm. Yes, so in the context that we’re using Fedimint, we’re saying, “Hey, we have the guardians. We have a few people, five or more, who can sign for the bitcoin and who are trusted by the community.” Now, on top of this, any other member of the community, any other member of the SACCO, can move and have access to their Bitcoin. Great. And then you basically issue e-cash tokens, and people then use the e-cash tokens to exchange Bitcoin with each other. Yes. But it’s not really Bitcoin; it’s e-cash, which has the advantage that it’s fully private. Right. Yes, so we are trying some models there. We take the base Fedimint protocol. We are deploying it as a SACCO because there’s a one-to-one match between the SACCO model and the Fedimint model. But exactly what the user gets – so we are like, okay, direct access to Bitcoin versus moving from Kenyan Shillings to Bitcoin versus any other product we build – that is now where we are starting and where we are experimenting. So it’s not yet fully defined as each member gets e-cash. Ah, okay. I didn’t understand that. I thought it’s similar to the Fedi model. Not exactly. So we are trying something. Yes. And I can give you examples of what we are trying. Right, so one thing we are trying is we just want the on-ramp part – moving from Kenyan Shillings to Bitcoin – to be super easy. Right. So in our interface we built a way for someone to say, “Hey, I want 100 Kenyan Shillings worth of Bitcoin.” So we go pull that money from mobile money, and on the other side, we allocate them the e-cash. Yes. So that is our on-ramp. Right. Meaning they have an e-cash account. Right. But we’re in the early stages of figuring out how much exposure or training we need to give to the eventual user on e-cash because e-cash is a very powerful tool. You can literally print it and hold it. So that’s one example. Another one is we do group savings. For the first time, we’re trying group savings. This is a smaller group than the SACCO itself – it’s a larger community, but there’s a group. We call these Chamas. Right. So a Chama has an e-cash account inside BitSacco. Ah, okay. Yeah. So you basically have the BitSacco hold the multisig. The guardians hold the Bitcoin in the whole SACCO. Yes. And then you have Chamas. Are they then decentralized, so they don’t have their own guardians? No, they don’t. The one set of guardians for everything. Yes. Yes, so that is exactly what we have today. But within a Chama, now we are building things like, “Hey, these three members of the Chama are helping the other members of the Chama know, learn, and use that interface.” Yeah. Very interesting. And what’s your time plan like? Is it usable already? We are in pilot. In pilot. We are launching in 9 days at the Africa Bitcoin Conference. Yes. And did you build your own wallet? Yes, we have a web wallet right now, which is BitSacco. It is KYC, meaning by law we need to have the users’ information as they’re coming in. That is for our compliance. On the other side, underneath, we’re deploying fully on Fedimint. So do I understand correctly: Is it only to hold bitcoin at the moment, but can people also use the e-cash in BitSacco to pay others or someone else? They can, they can. Yeah? They can even withdraw it back to Lightning as Bitcoin. Yes. Yeah, okay. In the future, everyone will be having a BitSacco wallet. Mhm. So every single member of BitSacco gets a personal wallet. Yes. So that is e-cash that is only for them. Right. They can also be part of a Chama, which means they join a group wallet within BitSacco. We have other products lined up for the future. Yeah. For example, one thing that is very popular here – in fact, it’s almost synonymous to SACCOs – is SACCO do lending. That is, we want to eventually figure out how to do that. To do lending? Yes, on Bitcoin. On it. That’s also interesting and a little bit – not dangerous, but you know, with the value going up and down, you know? Yeah, yeah, yeah. That’s why it’s so interesting, but also that’s why we are not starting off from day one with it. Yeah. Okay, so that’s very interesting. And it will be in Kenya-only, or do you have plans to expand? But then, the SACCO is not an instrument in other countries. It is an instrument in other countries. It might have different names, but I love this question because the way I want to think of it is from a protocol or framework perspective, you know? Like that background. So BitSacco is open source. Right. And the idea is to build a template for someone to then go deploy a SACCO-like instrument in Uganda, in Zimbabwe, or somewhere else. Right. So we’re building the framework, we’re building that template. It’s available for anyone to go deploy. The only thing they would then need to figure out is the regulatory framework in their country. Yeah. Our first instance is Kenya-only. That is the first instance we’re deploying. Are you in any way scared because you have to KYC people that the government might shut you down or surveil people and the Bitcoin? What’s your thought on that? I think we are at risk. The singular instance that is BitSacco in Kenya is obviously at risk from the regulatory capture of the country. But the goal – one of our defined goals – is to be a bridge where people get familiar with Bitcoin, people can move into Bitcoin, and then easily move off to more secure solutions or self-custody. Okay, so it’s an entry level. Yes. You can then go into self-custody or things like that. Yes, exactly. So do that. Do it really well. Have people gain comfort. Have people trust Bitcoin. And you also have the e-cash payments, which are private anyway. Yes. Which is great. Yeah. So if you had to move, you can even move in a more private way out. Yes. Thank you very much, Jodom. I’m looking forward to the launch in 9 days. In 9 days, yeah. So I can’t use it because I can’t KYC here, right? Yes. Or will you do a demo? We will do a demo. Great. Yes. So we are still in an environment where you can try it. Super great. Alright, thank you. Yeah.
