Cashless Policy Will Promote Loans For MSMEs: Central Bank of Nigeria

Haruna Bala Mustapha, who serves as Director of Banking Supervision at the Central Bank of Nigeria (CBN), revealed that the cashless policy in the country will help to promote loan services for MSMEs (Micro, Small, and Medium Enterprises).

In a virtual event titled, "Harnessing the Benefits of Cashless Policy on Credit Allocation in a Developing Nation," Mustapha explained that they don't want to eliminate cash completely from the market but instead, want "to reduce the use of cash and encourage people to make electronic payments."

Adeniyi Adekunle, who represented Mustapha during the event, noted that maintaining cash is a burden for the government, considering Nigeria is mainly a cash-based economy. He explained that going cashless would help the country with more transparency.

"We see that it enables a faster and easier payment, you can do online transactions from the comfort of your home," Adekunle said during the event Saturday, as per DailyPost. "We are not there yet, but we are working with our payment solution providers to improve the payment gateway to cope with the increased volume."

The CBN director further shared the benefits of the cashless policy, including cost-saving.

"The less we release cash the more that we save in terms of cost," he said, according to Punch. "We talk about the increase in transparency and accountability; you are offered insight into the borrower's credit history as well. The CBN will keep encouraging everyone to leverage the benefits of cashless policy so that we can also drive financial inclusion and promote economic growth in Nigeria."

Ade Bajomo, who serves as the President of the FinTech Association of Nigeria, discussed the potential of digital payments during the virtual meeting.

"A cashless policy has the potential to revolutionize Credit Allocation in developing nations by creating a digital trail reducing the cost of credit assessment providing greater transparency, making it easier to assess creditworthiness, improving credit scoring speed and open loan processing, risk management, promoting financial inclusion," Bajomo said.

Bajomo further pointed out that these can help "individuals and MSMEs to access credit, and drive economic growth, improve the standard of living and the role of credit bureaus."

He also shared that the cashless policy will provide several benefits including convenience, speed, transparency, security and customer experience.

He emphasized that the most significant benefit of a cashless policy is the impact it has on credit allocation in developing countries. "The lack of credit is a significant barrier to economic growth and development," Bajomo concluded.

Nigeria's economy is struggling as the new currency redesign policy (demonetization), mopped up over 70% of cash in the country and caused an estimated loss of N20 trillion.

Last month, CBN asked all commercial banks to operate on the weekends as well with the aim of reducing the ongoing cash crush in the country.

Nigeria is not the only country to do demonetization. Previously, countries like India, Venezuela, Zimbabwe and North Korea implemented similar changes in their banking system.