Rwanda Is The Latest African Country Considering A National Digital Currency To Boost Financial Inclusion

Rwanda Is The Latest African Country Considering A National Digital Currency To Boost Financial Inclusion

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Rwanda is considering the introduction of digital currency to boost financial inclusion. Rwandan President Paul Kagame addresses the 73rd session of the United Nations General Assembly, Tuesday, Sept. 25, 2018 at the U.N. headquarters. Image – AP Photo – Seth Wenig

Rwanda is considering issuing its own national digital currency to speed up financial inclusion, but other efforts in Africa haven’t exactly been successful.

The National Bank of Rwanda is researching how other central banks have gone about creating a national digital currency, according to Bloomberg.

Rwanda is the second African country to show an interest in a digital currency this year. Earlier in 2019, South Africa’s central bank announced that it was doing a feasibility project.

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Around 62 percent of sub-Saharan Africans do not have a bank account, according to the World Bank Global Findex.

A digital currency would allow consumers to transact without a bank account while reducing the cost of transactions, proponents say.

Rwandan authorities are taking their time gathering information and aim to learn from the experiences of central banks in Canada, Singapore and the Netherlands, which have tested the use of blockchain technology.

Digital currency in Africa

Other African countries have launched digital currencies.

In 2015, Tunisia became the first country in the world to issue a blockchain-based national currency, the eDinar. Similar to cash, the eDinar distribution and issuance is regulated by a governmental body, La Poste.

Two years after the eDinar was introduced, 700,000 virtual accounts were active. That was a good start but represents only a small percentage of the 11.5 million Tunisian population, according to The Carnegie Middle East Center.

Senegal issued its blockchain-based eCFA in 2017. The eCFA was supposed to be rolled out in other West African countries including Ivory Coast, Niger, Togo, Benin and Burkina Faso if it was deemed to be successful.

Those plans have not yet materialized, suggesting that the digital currency has not had the immediate financial inclusion impact in Senegal that was originally hoped for. Cryptos goes so far as to say that Senegal’s attempt at a state-sponsored cryptocurrency has “failed miserably”.

While Rwanda, Tunisia, Senegal and South Africa are embracing blockchain technology, some African countries have banned or placed harsh regulations on cryptocurrencies.

In 2017, Namibia announced that the spending cryptocurrency in the country was illegal. Other countries like Zambia have warned about the risk of using cryptocurrencies.

Nigeria and Kenya, two of the continent’s largest economies, have gone from warning banks against trading or doing business in cryptocurrencies and comparing them to pyramid schemes to researching policy proposals and studying benefits of the blockchain technology that underpins cryptocurrencies.