As we count losses from Covid-19, we must also see the silver lining around the pandemic. It proved to us that a cashless economy is a possibility.
With the Central Bank of Kenya’s waiver on money transfer charges and telco’s support, mobile money penetrated even the deepest regions of the country.
There is more to a cashless economy than preventing the spread of disease. It’s said that money is evil, but perhaps the evil is with currency notes and coins.
Cashless transactions are poised to bring transparency and sanity to the business world.
Talking of sanity, since 2013 National Transport and Safety Authority has plans to introduce rules for cashless commuter services to eliminate bribery in public transport.
The challenges of the matatu sector may be visible to all, but the same cut across all SMEs. Our economic system is largely informal.
A cashless system is a practical way of formalising the informal sector. In the business model of a kiosk or a matatu, tracking how much is coming in and out is impossible.
A lot of cash is lost to employees and customers, sometimes even to the proprietor without knowing. The saviour can only be passing the transactions through electronic means.
If all transactions are processed electronically, the need for bookkeeping will diminish and SMEs will need not invest in accounting systems.
A statement from mobile money is good enough to extract all information needed provided no transaction leaks outside the system. There would be no leakage if the entire economy is cashless.
If all transactions in the economy can be tracked, guess who would be the first beneficiary? The informal sector poses a big challenge to the taxman.
The sector’s worth remains unknown, the players are untraceable and some locations are inaccessible.
Taxpayers in this sense lack the basis for determining their tax bill, assuming they are willing to comply. It is impossible for the tax authority to comb through the tangled-up transactions of this sector.
The solution can only be a formal system of recording activities. A cashless system offers a perfect remedy.
Tax evasion aside, there are so many ills associated with cash.
Think of any formal enterprise, say a car dealership, they can’t accept cash for obvious reasons.
Bank notes attract armed robbery, can be embezzled by staff, or can even be fake. Clandestine deals thrive on physical cash.
Ranging from petty bribes to mega black-market deals, the perpetrators know the risk of leaving a trail. In any illicit financial flow, once the money leaves the banks, it comes back as very clean money.
The thought of a cashless economy might seem to be farfetched, but once upon a time, we had cowrie shells, then precious stones, and now printed papers.
An idea whose time has come may be delayed today, but welcome tomorrow then wonder what was the point of delaying.
The writer is the Deputy Principal at KCA University.
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