Sending Money to Yourself in Africa

Getting access to money in Africa takes some planning. Using cash is always easy once you have the right currency in your hands, but the exchange can be expensive. If you want to avoid expensive transaction fees and waiting days for processing you need to set things up before leave. I’m going to compare several ways to access funds in Kenya from your US bank account.

Converting currency at the airport - This is the most convenient and the most expensive way to convert cash. The exchange rates are terrible and there is a fixed transaction cost. At the time of this writing, Kenyan Shillings were worth about a penny on the open market. So $100 USD is worth KSH 10,000. However, converting $100 USD at Travelex at the airport would leave you with only 7,900 Kenyan shillings. The first $10 USD would go to the transaction fee and the remaining $90 would have a hidden cost of about 12% from the exchange rate. That’s an effective transaction cost of 22%. Avoid this option if possible. It’s a good idea to have at least some cash before traveling, so I recommend calling the branch where you do your banking to see if they will convert your dollars.

Using an ATM at your destination - Another option is using an ATM. It’s less expensive than converting at the airport, but it can still be expensive. It is convenient, so if you want to have this option, call your bank in advance to let them know you are travelling. Depending on your bank, the exchange rate typically ranges from 1% to 5% worse than even money, plus there is a transaction fee that can be as high as $5 USD. So you could be paying up to 10% to convert cash this way.

Mobile Money - Using mobile money has been widely adopted in Kenya. At the time of this writing, the most widely used is MPesa offered by Safaricom. You can send the equivalent of a Kenyan Shilling in the form of MPesa through SMS. It’s very convenient. In Nairobi, most vendors have a vendor ID posted at the cash register or on the wall so you can easily send Mpesa to cover your balance. You can get an inexpensive smartphone (~ $35 USD) that will allow you to send and receive MPesa. The vendor typically absorbs the fee, the same as in the US. Sending money from one person to another is around 1% to 2%. Converting MPesa to Kenyan Shillings can be done at an ATM, which is recommended if you venture out of the city. You can see their fee schedule here. So using MPesa is easy once you have them. Let’s now look at two ways to load your MPesa account.

USD > BTC > MPesa - One option is to convert USD to Bitcoin and then to MPesa. If you already have a Bitcoin wallet this might be an option to consider. It can take several days to connect a Bitcoin wallet to your bank account. Then it can take several more days (up to a week) for your transaction to clear. BItcoins are highly volatile, so the longer you hold them, the more risk exposure you will have to price swings. It’s not unusual for the price to change 5% to 10% or more in a single day. You can instantly purchase BTC from a bank account through Coinbase if it is backed up by a credit card. Coinbase has a transaction fee of 1.5%. However to get to MPesa you will need a second wallet. Bitwala offers free transfers to MPesa for accounts that have second tier verification, which means you have submitted proof of ID. I stopped there since I didn’t have an easy way to submit documentation while in Kenya. If I knew about this option in advance I would have provided documentation so I could go this route. In theory, you can go from your bank account to Coinbase for 1.5% through an instant purchase. Then it’s free to go from Coinbase to Bitwala, then Bitwala to MPesa. You should be able to go from Coinbase to Bitwala in about 15 minutes, so there is a short time where you are exposed to potential price swings.

Debit Card > MPesa through Wave - The most convenient option in my experience is using Wave. You will need to verify your account over the phone, so you it would be wise to call before traveling. I discovered this option while in Kenya. I was using a wifi enabled phone and was able to call from Kenya easily. After installing the Wave app on my primary phone I could send funds to my MPesa account on the phone I had purchased in Kenya. It was instant and the exchange rate was close to even money. This was the most cost effective and most convenient option.

Apr. 03 2017