Can digital currencies boost financial inclusion in Africa?

Digital currencies have become an integral part of everyday life, but the question arises whether a national digital currency in Africa could enhance financial inclusion. James Benoit, a YPO member and the CEO of FCMB Bank UK, discussed the potential impacts of a national digital currency on financial inclusion in Africa during an interview with CNBC Africa. Benoit acknowledged that a national digital currency could indeed enhance financial inclusion in Africa, depending on how accessible and user-friendly the currency is. He highlighted the importance of direct access to the central bank or commercial banks for an electronic currency to reach a wide range of users effectively. While cryptocurrencies like Bitcoin are accessible, their complexity might pose a challenge. Therefore, the design and accessibility of a national digital currency would play a vital role in boosting financial inclusion. One of the key concerns raised during the interview was the need for credibility and trust in a currency to prevent it from losing value. Benoit pointed out that while a national digital currency could work well within local markets, establishing trust in the issuing parties is crucial to avoid the risk of privatization and counterparty uncertainties. Central banks' traditional role in ensuring trustworthiness through cash has been evolving due to the increasing shift towards digital payments. Establishing trust in the entities issuing digital currencies would be pivotal to their widespread acceptance and adoption. When discussing the potential issuance of a national digital currency by central banks like the South African Reserve Bank, Benoit emphasized the importance of considering the implications for commercial banks. While a central bank-issued currency could broaden access to financial services, it also raises concerns about the displacement of commercial banks and the impact on money supply and credit creation. The integration of central bank-issued digital currency into the existing banking ecosystem would require careful consideration of the services and infrastructure that commercial banks provide. Moreover, the interview addressed the growing cybersecurity risks associated with digital currencies. Benoit highlighted the challenges of combating fraud and cybercrime in a digital financial landscape where technologies evolve rapidly. Ensuring robust security measures, such as authentication protocols and encryption keys, would be essential to safeguarding digital transactions and fostering trust among users and regulators. In conclusion, while the concept of a national digital currency holds promise for enhancing financial inclusion in Africa, various factors such as accessibility, trustworthiness, regulatory frameworks, and cybersecurity measures must be carefully evaluated and implemented. The journey towards a more inclusive and secure digital financial ecosystem in Africa will require collaboration among stakeholders to address these challenges and leverage the potential benefits of digital currencies.