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A month ago I visited an exporter in Ruiru who processes crude avocado oil. They have contracts to deliver every month to buyers in Portugal, Italy and Spain, which means they need a consistent supply of avocados throughout the year. But Kenya’s avocado season lasts for 3 to 4 months and when the local harvest ends, this exporter has to cross borders to source avocados from Tanzania, Uganda, Burundi, Congo and Mozambique. The interesting thing is that when their Italian buyer sends a deposit, it arrives in 2-3 days. But when they try to pay a supplier in Burundi, where there’s a chronic shortage of US dollars in the banking system, it can take up to a month for the supplier’s account to be credited. And in agriculture, one can’t afford to wait even a few days because they’re dealing with highly perishable goods and sadly in most parts of Africa we don’t have the infrastructure to preserve these commodities for that period of time.
This isn’t unique to the above-mentioned avocado oil exporter, you hear the same from every agricultural exporter except maybe with flowers and herbs. For the past three months I have been doing market research on payments in Kenya’s agricultural export sector, and what I have learnt after interviewing almost 50 agricultural exporters is that it is consistently easier for Kenyan agricultural exporters to get paid by their customers in Europe than it is for them to pay suppliers in neighboring African countries.
So how do traders navigate this problem? The suppliers end up physically transporting their goods across borders to get paid cash on delivery at the Kenyan exporter’s packhouse. With most suppliers struggling with cashflow constraints this limits the volumes they can trade as well as creating inefficiencies throughout the supply chain. Kenyan exporters are trying to meet the demands of global buyers who expect consistent, large-scale deliveries, but they’re operating with a system that requires physical presence and cash exchanges for every cross-border transaction.
This is exactly the kind of problem the African Continental Free Trade Area should be aiming to solve with the Pan-African Payment and Settlement System. PAPSS works by connecting the real-time gross settlement systems of African central banks. When a trader wants to make a payment, their bank sends the instruction to their central bank, which forwards it to PAPSS, and then PAPSS sends it to the recipient’s central bank and their local bank. It enables businesses to make cross-border payments in their local currencies instead of having to convert everything to US dollars first, with automatic currency conversion happening through the system. So in theory, a Kenyan exporter could pay a Ugandan supplier in Kenyan shillings, and the supplier would receive Ugandan shillings in their account within hours rather than weeks.
But PAPSS has a significant problem: it requires formal bank accounts to function, yet mobile money is far more prevalent across the continent. In Kenya, the 2024 FinAccess Household Survey found that 82.3% of adults used mobile money compared to only 52.5% who held bank accounts. This disparity exists because mobile money succeeded where traditional banking failed – reaching rural populations, informal traders, and people without the documentation or minimum balances that banks require. Mobile money is also more accessible and affordable, with simpler transaction processes and lower barriers to entry. Given mobile money’s proven track record of driving financial inclusion across Africa, the decision to build PAPSS around formal banking infrastructure seems to ignore the very system that actually works for most Africans.
PAPSS’s reliance on formal banking is part of a broader problem scholars have identified with AfCFTA’s approach to African trade. The issue is more fundamental than just payment systems – the vast majority of intra-African trade happens informally. According to Afreximbank’s Africa Trade Report 2020, informal cross-border trade in Eastern Africa is projected to be worth as much as 80% of the value of formal trade. In his paper “Analyzing the African Continental Free Trade Area (the AfCFTA) from an Informality Perspective: A Beautiful House in the Wrong Neighborhood,” Lere Amusan argues that “The Pan-African Free Trade Agreement failed to prioritize or mainstream the ubiquitous informal businesses in Africa in the main AfCFTA text, its supplementary protocols, and annexes.” Similarly, research in the Journal of Contemporary African Studies argues that the limited inclusion of informal economy actors such as informal cross-border traders appears to undermine the potential of the AfCFTA as the architecture for inclusive socio-economic development in Africa.
As someone who works in the agtech space, I see this scholarly critique validated everyday: avocados from Tanzania heading to some of the largest packhouses in the outskirts of Nairobi, livestock being herded from across the horn of Africa and brought to Laikipia for fattening before they are sent off to markets in the Middle East, or even pineapples in Marikiti market brought from Uganda. These are precisely the informal cross-border traders that scholars argue AfCFTA has failed to include. Yet we see the exporter paying the trader in cash and the trader also pays the farmer in cash, using mobile money in their home countries. This massive informal economy operates outside the formal structures that AfCFTA and PAPSS were designed to serve.
This is where stablecoins become interesting for intra-African agricultural trade. If you’re not familiar with stablecoins, they’re digital currencies designed to maintain a stable value by being pegged to assets like the US dollar. Unlike Bitcoin, which can swing wildly in value, stablecoins like USDC are designed to always be worth exactly one US dollar. This works because the issuing company holds an equivalent amount of US dollars in reserve for every stablecoin in circulation, so you can always redeem them for actual dollars. What makes stablecoins attractive for African trade is that they combine the stability of the US dollar with the speed and low cost of digital transactions. A payment in stablecoins settles within minutes, costs much less than traditional wire transfers, and doesn’t require both parties to have accounts at the same bank or even in the same country.
For agricultural traders dealing with perishable goods and tight margins, this addresses some real problems. Take our Ruiru avocado processor – he could send a deposit payment to a Burundian aggregator through his mobile phone, and the Burundian trader would receive the USDC within minutes instead of waiting weeks for a traditional bank transfer. The payment would be in US dollars, which eliminates the foreign exchange risk both parties face with volatile local currencies. And the transaction wouldn’t depend on either party having access to US dollar reserves in their local banking system, which is often what causes those long delays we talked about earlier.
But there’s still a massive challenge with stablecoins as they work today. While the cross-border payment part works well, the Burundian trader still has to convert those digital US dollars into local currency so he can pay the farmers he’s buying from, pay workers picking and packing the avocados, pay for transportation, and cover other local costs that are still in Burundian francs. This conversion process – what the crypto industry calls “off-ramping” – is where things break down.
Some platforms are trying to solve this off-ramping problem by building bridges between stablecoins and local mobile money systems. Companies like OneRamp and Paychant let you receive USDC on your phone and convert it directly to local currency in your mobile money wallet, whether that’s Kenyan shillings in M-Pesa or Ugandan shillings in MTN Mobile Money. These platforms have made some progress in markets like Kenya and Uganda, where they can find reliable liquidity partners and financial institutions are relatively functional.
But in markets where financial institutions are fragile or dysfunctional, the whole model falls apart because of a basic economic problem facing liquidity providers. These providers supply the local currency needed for stablecoin conversions, but they face an impossible choice: hold large reserves of weak, depreciating currencies or hold scarce, stable US dollars. Most sub-Saharan African currencies have gotten weaker against the US dollar because of high inflation, political uncertainty, and limited foreign exchange reserves. The scarcity of dollar reserves, combined with ongoing inflation, creates a cycle that keeps weakening local currencies. For liquidity providers, this creates a simple calculation. Why keep large reserves of Burundian francs that could lose value overnight when US dollars are both stable and scarce? When a Burundian trader needs to convert $1,000 worth of USDC to pay local farmers, the liquidity provider must have those francs ready. But holding significant reserves of a depreciating currency means accepting inevitable losses as the franc weakens against the dollar. This reality creates a structural reluctance to maintain the reserves that make off-ramping possible, causing service reliability to collapse exactly in the markets where alternatives to traditional banking are most needed.
This creates a cruel irony: the markets that most desperately need alternatives to broken traditional banking are exactly where stablecoin off-ramping services are weakest or don’t exist at all. The real challenge isn’t about technology, it’s about economics. Building dependable local liquidity networks requires solving the same underlying problems that make cross-border payments difficult in the first place. Stablecoins can move value instantly across borders, but unless those digital dollars can reliably be converted to local cash, suppliers remain stuck. Unless, of course, everyone across the value chain including the smallholder farmer agrees to trade in USDC. This isn’t as far-fetched as it sounds. In Mogadishu, I witnessed an entire economy that had effectively dollarized. Mobile money transactions, market purchases, everyday commerce, all conducted in US dollars rather than the local Somali shilling. When local currencies become sufficiently unreliable, populations naturally abandon them in favor of more stable alternatives. Until either this liquidity problem is solved or entire agricultural value chains adopt dollar-based transactions, the promise of seamless intra-African agricultural trade using stablecoins will remain unfulfilled.
