Mobile money loans

The number of Kenyans that are not connected to a smart phone is hampering Central Bank’s Plan to introduce a digital currency (CBDC)  in the market.

According to CBK Governor Patrick Njoroge, the smartphone issue is delaying the rollout of the central bank digital currency, a virtual version of the shilling which will exchange on a one-to-one basis with physical cash.

33 million (56 percent) of the 59 million cell phone devices connected in the country are feature phones according to official data.

If CBK was to roll out the digital currency in the present situation half of the population in the county would be locked out from transacting in the CBDC.

“The use of the digital currency on 4G-enabled phones would hurt Kenya’s financial inclusion,” Dr Njoroge said.

The digital currency is expected to ease payments and cut transaction costs. It will work in the same way as physical hard currency, exchanging freely within wallets and in person-to-person payments.

“The CBDC will have a minimum viable technology requirement, which may be a sort of fourth-generation (4G) environment. There is an argument to be made that such a development could lead to greater financial exclusion such that some people may fall out of the financial system just because we have adopted a CBDC… This is something we need to be careful about,” said Dr Njoroge.

“We may decide therefore that we should wait a little more until everyone catches up because at this moment the lower-level technologies are quite prevalent with us.”

Public Participation

Central Bank last month invited, members of the public to share their views on the potential introduction of the digital currency. Kenyans have until May 20 to submit their feedback.

Ghana and Nigeria are the only countries in Africa that have already piloted their digital currencies. Nigeria, which launched Africa’s first CBDC in October 2021 is also faced with the same dilemma as Kenya; financial exclusion as only 32 per cent of Nigeria’s cellphone users are on smart devices.