First, the good news is that, Malawi has been steadily moving away from a predominantly cash-intensive society to a cashless economy in the last decade—even though the proportion of individuals with an access to banking services is only 15 percent, one of the lowest in the Sub-Saharan region.
The latest data from the Reserve Bank of Malawi, estimate that internet banking in the country jumped 78 percent from K58.43 billion to K268 billion from 2012 through 2016, whereas mobile banking leaped 96 percent from K3.6 billion to K100 billion in the same period—marking a big deviation from the traditional use of transactions such as cash payments to non-cash payments.
This sudden take off, of course, has been attributed to dynamism and strength of the financial sector in the country—thanks to innovative banking, money literacy, trade and capital flow, that have sneaked into our economy recently.
There are many benefits to a cashless economy.
Electronic transactions would mitigate any problem of counterfeit currency. Malawi since the dawn of independence has seen a lot more cases of forgery, especially with the Kwacha currency. The classic example that remains fresh at the back of our minds is the 2016 December criminal case in Nkhota-kota, where a man was apprehended by the Nkhunga police in possession of fake newly introduced K2000 notes. Assuming the country had gone cashless, such incidents would have been reduced remarkably, considering that electronic payments minimizes the chances of counterfeit.
Importantly, the country would be able to deal with the problems of handling paper money. Because everyone now is hustling so hard just to make sure ends are met, it proves even more hazardous to move around or complete transactions with a lot of cash. Regardless of whether one is making arrangements in the presence of police or not, it remains worrisome.
Moreover, our worst criminal record in the Sub-Saharan region makes it even more visible that going cashless would be a great relief, especially to those who are heavily involved with cash-intensive transactions such as banks. Let alone, incidents of robbery would lessen significantly. In Sweden, for instance, the cases of bank robberies were as high as 110 as of 2008, before their economy went cashless: subsequently, the bank robberies plunged from 110 in 2008 to 16 in 2011.
However, just like capitalism—an endless adaptable system that could solve one problem today at the expense of creating another the next day, the same could also be true for a cashless economy.
In fact, it is never short of flaws.
With high-level computer and software skills easily accessible to the masses, going cashless could potentially increase threat to cyber security: let alone, individual financial data. This could be problematic, mainly for financial institutions, as well as mobile operators.
While Malawi is seemingly swimming in the blue ocean of the corruption curse, many ideas have been identified and tried in attempt to restrain fraud in the country. And one of those emerging ideas is cash-free society. But is it really about cashless or something else?
The question of whether the cashless economy would be beneficial to fighting corruption remains far more complicated than this. The answer hinges on whether the country has robust socio-economic conditions or not.
In the same vein, it should also be understood that there is no established one-one relation between cashless economy and corruption, as a matter of fact, there is no tie-up whatsoever between these two.
For instance, the recent Transparency International’s corruption ranking for both Germany and Kenya uncovers this distinction clearly. The former with a score of 81 in the corruption perception index is by far a cash-rigorous society whereas the latter is extremely cashless community—yet with a corruption perception index score as low as 25. The scores are achieved by looking at aggregate indicator that combines different sources of information about corruption such as illegal activities, which are deliberately hidden and only come to light through scandals, investigations or prosecutions. It has a range of 0 to 100. The higher the score is, the safer the country is from corruption, and vice versa.
Yet, the recent study on corruption in non-third-world countries conducted by the Global Anti-Corruption Coalition confirms that corruption could disappear to a greater extent in cashless economies as compared to cash-dependent economies, but with an assumption that vigorous socio-economic indicators encompass the evolution process from the latter to the former.
The study, for instance, suggests that all countries that were understudy only top 30 countries—including Sweden, South Korea, Canada, United States, among others were cashless economies, the rest were not. The survey, however, remains silent on the position of third-world countries because the exercise did not include them due to inefficiencies of their administrations.
So where does this leave us? Now that there are two possible accounts of cashless economy vis-à-vis corruption, both consistent with details. What is the truth here?
Honestly, I’m tempted to write only the good stuff about cashless economy, unfortunately I will have to disagree for once with anyone out there who thinks that less cash-intensive economy would stop corruption. To begin with, I think it is a misconception to think that cashless economy would flush out corruption. And again, the manner in which this rhetoric has been purportedly presented to the public conceals the entire truth.
There are, of course, certain things such as education, vibrant technology, strong state, among others that we ought to have in place first, before we even start having a discussion about exclusively electronic payments; and perhaps more importantly, a cashless economy should evolve from within the structural set up of an economy, not the other way round.
And anything less than that, of course, is a problem. I recognize how impatient we are to take our country to the next level—but we shouldn’t forget too easily. It may well be of your interest to know that the cost of corruption we are paying today is as the result of the 1994 awful political transition. We betrayed each other by rushing the process of democratization in the country even when our political institutions were not up to standard.
And perhaps more questions: Did any of us see this coming? Could we have done better? Did we fuck up? The answers are probably yes, yes, and yes.
We might even be tempted to think that we did everything we could, to justify our horrendous mistake. It’s probably much more likely that we did fuck up, that we didn’t think through enough—even though we read the signs, but we chose to ignore them. Instead, we were too busy involved with our own personal agendas ahead of those of the country.
The same could as well be true for cashless economy we are craving for now. How do we even think of going cashless when the Ministry of Education Science and Technology reports that over five million people do not know how to read and write, not even to talk of knowing a grade two subtraction math, really?
The biggest danger in romanticizing this notion of cashless economy is to grow comfortable enough, that we will excel in our dealings by the next day without putting our house in order, first. We need a stable macroeconomic environment more than we need a cashless economy. Otherwise, we are yet to see our worst days.
- Khumbo Kalua is a Malawian. Currently doing his bachelors degree in Political Economy at Bennington College in the United States. Feedback: [email protected]