Co-Founder and Managing Partner of Koranteng & Koranteng Legal Advisors, a corporate and commercial law firm in Accra, Ghana, Afua Adubea Koranteng, has said a Central Bank Digital Currency (CBDC) could serve as a catalyst in bridging the digital and financial divide faced by women and youth entrepreneurs.
Speaking on the theme ‘Policy Impacts of a Potential CBDC for Women and Youth in Africa’, during the Africa Central Bank Digital Currency Week 2022 organised by the Global Policy House from February 7-11, 2022, she stated that contrary to concerns the presence and success of mobile money in countries like Ghana and Kenya would render CBDCs redundant, the widespread acceptance of mobile money among women and young people bodes well for the adoption of central bank-issued digital currency and will lead to deeper financial integration.
Research conducted by the Mastercard Foundation Index on Women Entrepreneurs in the world placed Ghana in third position after Uganda and Botswana for countries with the highest number of women entrepreneurs. Women entrepreneurs operate largely in the informal sector and face numerous challenges in accessing finance and digital products.
Likewise, the youth (60 percent of the African population is under the age of 25) who form a large part the African population also face challenges with access to finance.
“Looking at what CBDC is able to do in terms of bridging the digital divide, I would say CBDCs will be the catalyst in helping women and youth entrepreneurs in Africa. If you look at the numbers, women entrepreneurs make up a high percentage of the populace but they fall within the informal sector – and as such are often marginalised. However, mobile money gives us an indication of what to expect for CBDCs,” she stated.
In a subsequent discussion with the B&FT, Ms. Koranteng noted that women and youth will benefit from the financial inclusion brought about by introducing a CBDC, since the ability to be independent and empowered with access to finance will help a mother educate her children.
Also, the youth can generate small businesses, pay for tertiary education and improve their lives; and digital payment platforms will continue to allow young and female creators to monetise their art and content on various online platforms.
Regulation, Education and Infrastructure
Crucial to success of the digital currency, added the lawyer with expertise in the legal regimes of telecom infrastructure and fintechs, is the twin duty of stringent regulation and comprehensive education on the central bank’s part. This, she noted, is crucial to building trust in a new product.
She highlighted that with a mobile money transaction value of close to US$12billion (GH¢75billion) in January 2022 alone in Ghana, for instance, there is a huge market for digital financial services and the populace is ready to adopt the use of efficient online services.
However, questions linger over regulation, data privacy and public mistrust. Education on and understanding the use of central bank-backed digital currency can go a long way toward (answering these questions and) overcoming this mistrust.
With regard to challenges that may plague a digital currency, she highlighted the need for infrastructure such as telecom towers in rural areas for Internet access, roads, and offline design features of the digital currency for a successful implementation.
In 2019, the Bank of Ghana announced its plans to launch a Central Bank Digital Currency (CBDC), the e-cedi, as the pinnacle of government’s ‘Digital Ghana Agenda’ which focuses on promoting digitisation in the financial sector. In August 2021, Ghana announced the pilot phase of a general-purpose Central Bank Digital Currency (CBDC), the e-cedi.
The digital currency, also known as CBDC, is potentially a new form of central bank money, which is an electronic record or digital token of an official currency – issued and regulated by the monetary authority of a country, and may serve both as a medium of exchange and a store of value.
The e-cedi is currently being tested in a trial phase with banks, payment service providers, merchants, consumers and other relevant stakeholders.
Although a general-purpose CBDC might be an alternative to cash, the BoG in introducing such a currency would have to ensure the fulfillment of anti-money laundering and counter-terrorism financing (AML/CFT) requirements.
In her final thoughts, Ms. Koranteng indicated that: “The improvement of finances will bridge the digital divide eventually, and Africa is poised to do this. With the advent of an African Continental Free Trade Agreement and its Pan African Payment and Settlement System, this is the time for Africa to actually leapfrog in terms of digital finance. Nations must however work together under the AFCFTA to continue developing laws and policies which promote financial inclusion, and that will enable objectives of the AFCFTA to be realised”.