Why Africa –and Zimbabwe- should go cashless


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On the contrary, as Harvard economist Kenneth Rogoff argues, successful demonetization requires a comprehensive and implementable plan to increase financial inclusion and use of banks.

Such a plan should focus on building the right ecosystem for economic activity.

In Africa, that means not just delivering financial services, but also advancing financial literacy.

Newly established bank accounts have few positive effects if they lie dormant.

To ensure that financial inclusion actually enables economic transformation, Africans must gain the knowledge and tools to make the most of financial services.

Of course, none of this will be easy – a point made clear by India’s challenging experience implementing its radical demonetization process.

Success will require, among other things, a gradual approach.

Africa must not allow cash scarcity to cripple the informal economy, as it has in India.

But if Africa succeeds in this transition, the benefits will be profound.

Demonetization would probably even save countries money.

MasterCard estimates that countries worldwide spend as much as 1% of their GDP each year to mint, process, and distribute banknotes.

That is money that could be better spent on meeting the United Nations Sustainable Development Goals, further improving the lives of Africa’s poor.

There is reason to believe that Africa can succeed in going cashless.

Already, a large share of Africans uses digital payment systems like M-Pesa and EcoCash – precisely the types of innovative platforms that can play a pivotal role in the shift away from cash.

While hyperinflation is far from the ideal catalyst for such a shift, Zimbabwe’s experience proves that citizens can and will adapt to challenging circumstances.

For example, some stores in the country will give credit to mobile money accounts in lieu of change.

But, to achieve a broader shift to a cashless Africa, progress toward monetary union will be essential for deepening economic integration across the continent.

That, in turn, would foster a continent-wide digital financial services ecosystem capable of underwriting a massive expansion of intra-African trade – the quickest route to lifting people out of poverty.

Continued next page

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Charles Rukuni
The Insider is a political and business bulletin about Zimbabwe, edited by Charles Rukuni. Founded in 1990, it was a printed 12-page subscription only newsletter until 2003 when Zimbabwe's hyper-inflation made it impossible to continue printing.

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