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Is “social inclusion” truly the main driver for cashless?

Categories : Uncategorized
November 29, 2017
Published in : Africa, Cash, Central Bank, Social Inclusion, Social network, Unbanked, Underbanked, Widespread
Rwanda is pushing for a cashless society on the grounds that it contributes to financial inclusion. But with a country that is predominantly cash-based - and with everyone having access to hard currency - what more is there to include?
Viktoria Dijakovic

As the cashless rush expands to other continents, it might be useful to stop for a moment and analyse what the main driver behind this trend is.

Traditionally, commercial banks and payment apps are those leading the way for obvious reasons: the former because they have an interest to lower cash-handling and logistics costs; and the latter because their survival depends on adoption rates. In Rwanda, however, it is the government who is leading the way to encourage the business community to adopt cashless payments.

One of the main motivators for this is to support financial inclusion. But the question here is, who is trying to include whom when the governor of the central bank himself admits that “paper money is still dominant in the economy due to a cash-based culture” (The New Times). What, if anything at all, is “exclusive” in the current cash-based culture?

The issue seems to be an inappropriate usage of the term “financial inclusion”, a term that is unfortunately being used too freely – and mostly wrongly – by cashless partisans. Indeed, cash is the most inclusive of all payment tools regardless of social status, education, gender, access to technology, to list a few.

In this particular case, the drive to transform Rwanda into a cashless economy by 2020 seems less motivated by a concern for ordinary Rwandans’ “inclusion” in society, than by the potential profits such a society could bring. In fact, Chief Executive of the Banque Populaire du Rwanda, Maurice Toroitich, discloses one of the real drivers behind the cashless campaign: “It’s time to understand that accepting non-cashless payment solutions will help encourage customers to spend more”- especially considering that 2016 McKinsey report projects a $3.7 trillion boost of emerging economies by 2025 if digital payments are adopted.

The bottom line is therefore more about getting ordinary citizens to spend more and deposit their money in bank accounts rather than ensuring that the cashless drive is motivated by consumer will.  “Digital financial services have proven to spur economic growth through a widening tax base and employment while promoting a cashless economy”, states Jean Philbert Nsengimana, Minister for ICT.

Arguments for or against a cashless economy are valid and debate should be encouraged, but it is high time to be transparent about the motives behind the push and, more importantly, to use certain terminologies more precisely and cease to mislead consumers. If increased consumption is indeed good for businesses – and arguably good for the economy – increased spending can be potentially devastating for many households and should never be the main driver behind such a radical societal change. 

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