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FINANCIAL TECHNOLOGIES

Africa, mobile money and the coronavirus effect

29 August 2022

A February report on CNBC informed us that Chinese banks have been ordered to disinfect cash before issuing it to the public in an effort to curb the spread of the new coronavirus. Since then Chinese banks were only permitted to release new bills which had been sterilized. At the same time, China started to quarantine money as banks were ordered to stop the transfer of old bank notes between cities most affected by the virus.

Was this an overreaction? Over time, researchers in several universities across the world have found that currency is a medium of exchange for hundreds of different kinds of bacteria as bank notes pass from hand to hand. Even when banks launched credit and debit cards dirty money was one of the basic arguments.

In 2020 with a virus which is far more contagious than others, less use of cash could be of critical importance for public health. In China, where electronic payment system is relatively advanced, the state accelerated work in the field of mobile payments in a bid to prevent human contact through cash exchanges.

Africa is at the second wave of Covid-19 spread. The first confirmed case on the continent was in Egypt on 14 February 2020, and the first confirmed case in sub-Saharan Africa was in Nigeria. As of mid-March, the number of reported cases in Africa was relatively low. But several African nations have shown fast reflexes in the use of mobile money, showing that cashless payment agenda was one of high importance, in order to curb the spread of the coronavirus in the region.

Kenya was the first country, which encouraged people to use e-payment services because it would cut down on the handling of cash and mobile operators responded, by waiving transaction costs on mobile money transfers.

Kenya’s example was followed by several major mobile money markets in Africa. Ghana and Rwanda were the first to follow, unveiling temporary measures to encourage the use of mobile money applicable to all service providers, while in Uganda, even though there was no formal notification from authorities, MTN sent letters to agents, announcing it was cutting tariffs following discussions with regulators and partner banks. A move which was being undertaken as a precautionary measure.

In recent years, the main argument of fintech companies providing mobile money services in emerging markets has been that of financial inclusion of the unbanked. Now, with a health crisis spreading around the world, these companies have yet another key argument, even more important. That’s the health safety of millions of daily transactions.