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Limited Access to Smartphones Challenge to CBK’s Digital Currency Plan

CBK governor Patrick Njoroge. [IMAGE/ COURTESY]

The Central Bank of Kenya (CBK) has said that the anticipated rollout of the proposed Central Bank Digital Currency (CBDC) could be hampered by the lack of smartphone access by about half of the country’s population.

According to official data, 56 percent (33 million) cellphone devices out of 59 million devices in the country are feature phones. This means that the apex bank might face a challenge rolling out the virtual currency that requires internet access to trade on a one-to-one basis with physical cash.

According to CBK Governor Patrick Njoroge, using the CBDC on 4G-enabled smartphones will have a negative impact on the country’s financial inclusion as it will lock out about half of the population from transacting using CBDC. The rollout of the digital currency is expected to offer an alternative to existing digital payments solutions, allowing users to ease payments and reduce transaction costs.

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“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.

The Governor said that as a result, the rollout might be pushed back to accommodate more Kenyans.

The CBK recently published a discussion paper on the CBDC inviting the public to comment on the issue.

“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.”

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The Discussion Paper outlines CBK’s development and potential applicability of a Central Bank digital currency and is inviting public participation in the potential adoption of a digital currency.

According to the CBK, a potential value in the use of CBDC is in facilitating cross-border transactions and while it is difficult to quantify the benefits, CBDCs may have the potential to lead to efficiency gains by flattening the multi-layered correspondent banking structure and shortening the payment chains.

CBDC will also prevent users from the emergence of new forms of private money through the provision of a secure digital currency.

Ghana and Nigeria have already piloted CBDCs, while Kenya, South Africa, Rwanda, and Tanzania are conducting research in preparation for the launch of their own versions.

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Written by Vanessa Murrey

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