Few days ago, I when to withdraw money from Liberia Development and Investment (LBDI) bank and I was turned away because of the shortage of Liberian dollars. I even when to United Bank for Africa (UBA) they could only pay a certain amount in Liberian dollars which were mutilated. I also when to several private institutions engaged in Western Union transactions they were shut down due to shortage of Liberian dollar notes which is very precarious. According to report, LBDI transferred payments to customers' mobile money accounts, but customers complained that when they went to withdraw cash they were told by the agents that there was no money. They said, "they can only send monies but payments to customers cannot be made".
Last year, finance and Development Planning Minister Samuel Tweah acknowledged the shortage of Liberian dollar banknotes on the market, and stressed the need for the printing of additional notes to mitigate the problem. Moreover, President George Weah submitted a bill to the National Legislature to approve the printing of 38 billion new Liberian dollar banknotes and the money are printed and approved but there is still shortage of Liberian dollars presently. I am still wondering where is the new banknotes that supposed to be circulating in the market?
As we are heading to Christmas, most of the people are hiding the Liberian dollars in their homes because they do not trust the banks in Liberia. Anytime the people go to the bank to withdraw money system is down and they can't get their money out.
Since printing billions of dollars can't solve the problem, I hold the strong believe that Cashless Economy can curb the shortage of Liberia Dollars on the market, I must admit.
A cashless economy is one wherein financial transactions are not conducted with money in the form of physical banknotes or coins, but rather through the transfer of digital information (usually an electronic representation of money) between the transacting parties.
Going cashless not only increases convenience, but it also helps authenticate and formalize the transactions that are done. This helps to curb corruption and the flow of black money; which has resulted in an increase of economic growth. The advantage of going cashless involves reduced expenditure incurred in printing and transportation of currency. However, that expenditure is handed over so service providers, such as mobile money and other digital service providers who would charge a fee for each transaction, as a way to maintain cashless financial platforms.
So far, cashless transactions can allowed consumers to access to their money in savings virtually from anywhere in the country.
Bank-issued cards and mobile money platforms have proven their convenience in many use cases from the mid to upper levels of the economy, such as SMEs to schools, supermarkets, DSTV System and other well-known merchant organizations who now receive tuition and other payments but the government is taken it for granted.
However, certain sectors of the economy, such as those in the public transport sector still find cashless transactions a bit cumbersome because the transaction process is still too slow. Also, many health centers still do not accept cashless payments and local businesses are still out of mobile money transaction in Liberia.
There are many benefits that can accrue from a cashless economy.
First, the costly printing of currency will stop.
With the government set to spend upwards of billion in printing the new banknotes, it would divert the huge amount to other sectors of the economy.
Secondly, the war on money laundering, terrorism financing and funding of illegal activities will be won easily with the elimination of high-denomination notes. The black market will suffer an irreparable damage with the counterfeiting ceasing to exist.
Thirdly, the Liberia Revenue Authority would widen its tax base as all transaction pass through the formal financial systems.
It will be hard for anyone to evade tax. Further, LRA can accurately determine the tax due from a taxpayer
The existing financial infrastructure and systems will also need expanding to the point that they are ready for a cashless economy. In countries that have made advancements towards a cashless economy, there is evidence that some of the pitfalls include loopholes in security. The need to have secure systems that allow citizens to transact without the worry of identity theft or other cyber fraud is critical.
Fourth, risks like theft by employees, burglary and robbery involving cash will be eliminated, just as the cost of physical security, transporting and counting of cash.
Lastly, it will ease data collection on citizen's spending paradigms. The government can better track movement of money to keep close tabs on any black money and illegal transactions in the country.
While a cashless economy may not be fully realized now, it is something that is surely coming our way in the near future. Adopting a cashless economy in Liberia will result in the reductions of the risks associated with transporting currency notes both for banks and individuals such as robbery. It will also help to formalize informal transactions since it is a transparent process thus combating crime and corruption while keeping record to reduce tax evasion. Convenience is also an advantage as sending and receiving money as well as recharging of prepaid credits will be done whenever and wherever one wishes.
On the flip side, in spite of the advantages, there are also some challenges that need to be addressed. Liberia will require a clear policies that would allow the players to follow a structured process towards achieving the full benefits of a cashless economy, including a national policy that encourages more electronic-based transactions, while discouraging physical cash usage and circulation.
There is still hope for Liberia.
Liberia must get digital.
I rest my pen!