Liberia: Cashless Economy Imminent?

Liberia might be lagging behind its counterparts in the sub region and the African continent regarding the move to digital economy or digital financial transitions, but there are signs that the transition could be made sooner than later if the government can work on a few policy issues and adapt a robust regulatory framework, a new research has said. 

The findings of the research, which was conducted by the Center for Policy Action and Research (CePAR) recently, revealed that there are high possibilities that the country can move to a cashless economy with most, if not all monetary activities being done via digital financial service platforms such as Mobile Money, TipMe and other mediums.

Digital Financial Services (DFS) products usage is growing in Liberia, the findings say, and this is in keeping with a similar trend observed within the Sub-Saharan Africa (SSA) region. More women tend to be going digital than men with 55% of women having mobile money accounts, while men account for 45%. And most of these women are entrepreneurs.  

Students account for 33% of those who only have mobile money accounts, while people between the ages of 18-25 account for 27% of mobile money subscribers while those above age 50 account for 8%.

“These are all great signs that our economy can go cashless if the right policies and regulatory framework are put in place,” CePAR’s Research Specialist, Josephfor K. Zumo, said. 

The CePAR’s research, titled Digital Financial Services in Liberia, funded by the United States Agency for International Development (USAID), was launched during a digital financial service policy dialogue held on Thursday at the Monrovia City Hall. The dialogue also took into consideration efforts that have been made towards digital transformation. 

The most prevalent DFS products in Liberia are Mobile Money and about 52% of the 1600 respondents drawn from six of the 15 counties, have mobile money accounts. The respondents, according to Zumo, who launched the findings through a presentation, were in two categories: Household and business respondents. The six counties where the survey was conducted include Grand Bassa, Nimba, and Montserrado counties. Others are Margibi Lofa and Grand Gedeh Counties.

The survey revealed that 84% of surveyed respondents have received digital payment/transfer while 16% have not. “Of those that received digital payment/transfer, 82% received transfer through mobile money while 0.08% received salaries payment/transfer through the banks; and 30% received transfer several times a month while 29% received transfer once a month.”

Digital remittances received directly by recipients via mobile phone or deposited in bank accounts, the research indicates, are closing the gap on traditional remittance receivership — remittance received at banks or agents’ locations.

“Of the 45% of survey respondents that have received remittance, 9% reported receiving digital remittance, while 20% of respondents received Mixed Digital Remittance1 and 15% received Traditional Remittance,” Zumo said.

Mobile Money agents’ locations are the most accessible points for financial transactions when compared against other access points, mobile money agent locations account for 91% of financial access points, the research revealed, “ATM, Bank Teller and Point of Sale (POS) account for 0.3%, 6.4%, and 1.3% respectively.”

Representatives of various financial institutions who graced the occasion 

“Mobile Money Account is the most popular form of business accounts among businesses,” he noted and that a survey of businesses across the six target counties showed 40% of businesses reported having mobile money accounts, 23% have bank accounts while 27% had both mobile money and bank accounts.

Finance and Development Planning Minister, Samuel Tweah, said in a special statement that Liberians need to leverage the huge opportunities that digital financial services present as it would bring more benefits not just to the government through the collections of taxes but to the ordinary Liberians.

He said DFS can be equated to development initiatives like electricity and roads that often yield high economic dividends. “The economic benefits of digital financial services can be larger like roads and electricity. We need to embrace this and take a serious look at it,” the minister said.

It is no secret that one of the most talked about issues within the international development community and many governments in Africa, with Liberia being no exception, is financial technology (fintech) — a computer program and other technology used to support or enable banking and financial services.

Bankers and other financial experts say Africa has become a hot-spot for the global fintech industry, with massive amounts of foreign investment flowing into the continent for a whole range of new fintech institutions and initiatives. Much of this excitement stems from the proliferating claims that, in a number of important ways, fintech will significantly improve the lives of poor people — an assertion with which Minister Tweah could not agree more.

However, Liberia’s DFS sector is at a developmental stage as it lags behind most East African and West African countries such as Ghana, Nigeria, and Ivory Coast.

DFS transactions in Liberia are dominated by Cash-in/Cash-out, Person-to-Person transfer, airtime purchased, and some limited bill payments and government-to-Person salaries transfers. As a result, cash remains the most dominant transaction medium across all economic activities. On another note, research evidence from other parts of the continent has shown that households with mobile money accounts were better positioned to respond to unexpected emergencies. 

“Our research confirms this finding, particularly for families in rural counties with family’s members in Montserrado or in the diaspora. Of households with mobile money accounts, 53% reported receiving mobile money transfers from friends and families during unexpected emergencies,” CePAR’s Executive Director, Jacob Jallah, said in his summary report. 

A slight majority of businesses accept digital payment. Of businesses surveyed, 52% said they accept digital payment while 48% do not accept digital payment. Preference for cash and cost are the two biggest obstacles cited by businesses to receive digital payment, the survey revealed. “Of businesses surveyed, 60% cited cash preference and cost as the primary factors in refusing to accept digital payment. However, of businesses that accept digital payment, 91% accept mobile money, 8% accept TipMe and 1% accept bank cards.”

Cash is the most prevalent tax payment channel in Liberia. Approximately 98% of government revenues (taxes and fees) were paid in cash between 2017 and October 2021. Over the same period, direct bank transfers and mobile money accounted for 1.3% and 1.1%, respectively.

In this regard, the Chairman on the House’s Committee on Banking and Currency, Dixon Seboe, noted that DFS cannot be more effective to ensure the economy goes cashless if some policy issues are not address — noting that the government must ensure that the circular flow of the DFS initiative is completed by allowing the purchasing of goods and services. “I cannot have money in my account but still need cash in my hands in order to buy. It doesn’t look right. The fact that I have money on my account I should be able to buy.

The Montserrado County District #16 Representative noted that businesses should be compelled to use DFS — calling on the Central Bank to tighten withdrawal in order to compel big spenders to use the digital space. 

“Liberia is one of the [very few] if not the only country that allows people to withdraw US5,000.00 to US$10,000.00.  This should not be happening. How can we encourage the use of DFS if we are allowing this? Let those funds be wired through the digital space,” he said.