## dpdpiea

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### Executive Summary — Major themes and scope
- Focus: Digital Payment Innovations in Sub‑Saharan Africa—Digital Payment Landscape; CBDC; Fast Payment Systems (FPS); Private Mobile Money; Crypto Assets; Policy Recommendations (Section 7).
- Structural context: Structural Features of Sub‑Saharan African Economies (Section 1.B); Key Issues for Development of Digital Innovations (Section 1.C).
- Cross‑cutting public finance and international dimensions: Leveraging Digitalization in Public Finance (Section 7.E); Synergies with Capital Flows, Climate Financing, and AI (Section 7.F); Cross‑border collaboration and interoperability (Section 7.G); Sound macroeconomic policy as foundation (Section 7.H).
- Annexes: 12 annexes including Annex 1 (CBDC complement/substitute to mobile money), Annex 6 (eNaira stocktaking), Annex 12 (Bank of Ghana eCedi pilot).

### Executive Summary — IMF survey and regional characteristics
- IMF survey: About 75 percent of surveyed sub‑Saharan African central banks are exploring CBDCs.
- Key CBDC motivations reported: boosting financial inclusion; improving domestic payment efficiency; reducing transaction costs and facilitating remittances.
- Region‑specific impediments: low mobile and internet penetration; unreliable electricity; large IT skill gaps; low financial and digital literacy; slow and costly payment systems; high informality; shallow financial systems; low tax revenue‑to‑GDP ratios.
- Core tension: benefits (inclusion, efficiency, lower transaction costs) versus heightened operational, integrity, macroeconomic, and capacity risks (notably from crypto assets).

### High‑level findings on innovations
- Fast Payment Systems (FPS): viewed as "quick wins"; promote speed, lower transfer costs, public–private collaboration, and interoperability.
- Private mobile money: major driver of inclusion; requires regulatory environment that promotes competition, portability, and deposit backing.
- CBDC: can complement private solutions when market failures or strategic rationales exist; many CBDC objectives can be addressed by private systems or other public policies; central banks should assess costs, risks, alternatives, and capacity.
- Crypto assets: use limited and concentrated; only one‑quarter of countries formally regulate crypto; two‑thirds implemented some restrictions; crypto should not be adopted as official currency or legal tender.

### Prominent regional risks
- Financial integrity: ML/TF and corruption risks exacerbated by crypto and weak regulatory capacity.
- Operational and infrastructure: network failures, internet disruptions, business continuity, cybersecurity.
- Adoption and design: trust, interoperability, rapid technological obsolescence.
- Macroeconomic and cross‑border: banking disintermediation, weakened monetary transmission, currency substitution, capital account volatility, loss of seigniorage.

### Four priority policy sets (Section 7 summary)
- Priority set 1 — Address structural impediments:
  - Improve access to electricity, internet, mobile networks.
  - Favor offline‑capable payment solutions where connectivity limited.
  - Expand national/digital IDs; invest in human capital and financial literacy.
- Priority set 2 — Support private digital payments and interoperable FPS:
  - Create enabling regulatory, operational, and supervisory environment.
  - Ensure EMIs meet statutory minimum licensing and initial capital; customer deposits invested in safe assets.
  - Safeguard cash provision and obligation to accept cash.
  - Bring crypto into regulatory environments; strengthen AML/CFT and institutional capacity.
  - Prepare to manage monetary transmission and financial stability effects (e.g., mobile money balances respond more quickly to policy instruments).
  - Invest in infrastructure and multi‑actor systems to mitigate cybersecurity and network risks.
- Priority set 3 — Public sector innovations as complements, not substitutes:
  - Prioritize FPS and competitive private solutions before CBDC unless persistent market failures identified.
  - CBDC could be settled on private FPS; resources to develop CBDC are larger than for FPS.
  - Digitalize public finance, enable fractionalization of government borrowing, and harness AI and blockchain synergies.
- Priority set 4 — Cross‑border collaboration:
  - Engage regionally to promote interoperability and consistent cross‑border legal, regulatory, and technological solutions.
  - Interconnect domestic credit histories to promote cross‑border lending.
  - Continue macro policies to address capital flow volatility alongside digital finance regulation.

### Case studies and empirical artifacts
- Figures: Figure 1 through Figure 8 and additional figures across chapters and annexes.
- Boxes: Box 1 through Box 7 and box figures (Box Figure 3.1, Box Figure 5.1, Box Figure 5.2).
- Annexes: CBDC comparisons, crypto adoption determinants, remittances, regional trade benefits, country pilots (eNaira, eCedi), FPS cases (PayShap), social safety nets (Togo).

---

### 1. Introduction — Key issues and structure
- Digital innovations offer potential: improve inclusion; lower remittance costs; reduce informality; deepen financial systems; facilitate cross‑border trade.
- Key issues:
  - Issue 1: Quality/stability of private mobile money may not develop everywhere; risks of market concentration and closed systems.
  - Issue 2: Digital instruments entail financial stability risks (banking disintermediation, rapid withdrawals).
  - Issue 3: Widespread crypto use without oversight risks crypto dollarization, volatility, and fiscal/legal complications.
  - Issue 4: CBDC development presents institutional, resource, stability, and operational challenges; premature CBDC risks obsolescence and limited interoperability.
  - Issue 5: Lack of integration across regional digital platforms; collaborative initiatives underway (PAPSS, GIMACPAY, SADC‑RTGS, BUNA).

---

### 2. Digital Payment Landscape — infrastructure, adoption, remittances
- Digital infrastructure and access:
  - Cellular subscriptions: about 80 subscriptions per 100 people in 2021.
  - Unique mobile subscribers: 489 million in 2023 (43 percent gross penetration rate).
  - Internet access: only 33 percent of population versus 68 percent in EMs and 90 percent in AEs.
  - In 2022, over 400 million of >900 million mobile phone connections relied on basic or feature phones.
- Mobile money and fintech:
  - Sub‑Saharan Africa hosts almost three‑fourths of world’s mobile money accounts.
  - In 2023, more than 70 percent of growth in registered mobile money accounts was in sub‑Saharan Africa.
  - Mobile money transactions per adult rose from 10 to over 60 during 2013–21.
  - Total value of mobile money transactions as share of GDP: from just under 10 percent in 2015 to more than 40 percent in 2021.
- Financial inclusion and remittances:
  - Account at formal financial institution: 33 percent of adults in 2020.
  - 34 percent of adults rely on mobile money for transactions.
  - Informal employment: about 70 percent of employment.
  - Remittances: about 2.5 percent of GDP; nearly half the population received domestic remittances in 2021–22; about two‑thirds of remittances sent digitally.
  - Average cost of sending US$500: 9 percent (March 2022), down from 10 percent (2011); SDG target is 3 percent.
  - Cross‑country remittance cost heterogeneity: ranges from 3 to almost 17 percent.

---

### 3. CBDC in Sub‑Saharan Africa — status, design, uses, risks
- Survey status:
  - Over 75 percent of countries engaged or planning CBDC research/development/pilots.
  - Two‑thirds in research phase; slightly over one‑third planning to conclude pilots within next two years; more than a quarter preparing for launch by 2028.
  - Nigeria has a CBDC (eNaira); Ghana and South Africa advanced to pilots; Cabo Verde, Kenya, Madagascar, Mauritius, Namibia, Rwanda, Tanzania, Uganda, Zambia, Zimbabwe in research stage.
  - Slightly less than a quarter of countries not planning engagement.
- CBDC variants: Retail CBDC (digital cash, general public); Wholesale CBDC (financial institutions/large interbank).
- Design and interoperability:
  - Centralized vs distributed ledger; hybrid approaches; tokenization and programmability (smart contracts).
  - Retail distribution options: tiered access via intermediaries; open API access for PSPs.
- Use cases and benefits:
  - Market failure remediation where FPS and private operators insufficient.
  - Cash distribution cost reduction; resilience and business continuity; programmable targeted transfers.
- Risks and mitigants:
  - AML/CFT risks; financial disintermediation; monetary transmission impacts.
  - Design mitigants: caps, nonremuneration, tiering, integration with private PSPs via APIs.
- Implementation guidance:
  - Preconditions: opportunity/risk analyses, capacity development, pilots, road map, stakeholder engagement, communication strategies.
  - Resource constraint note: prioritize strengthening FPS and private competition where resources limited.

---

### Box 2. Retail CBDC and the Law — legal and operational preconditions
- Legal foundations: central bank law, monetary law (legal tender status), payments law (final settlement), private law (token ownership, custody).
- Operational preconditions lacking in region: functioning technological infrastructure, devices, national ID coverage, internet connectivity, financial/digital literacy, central bank technical expertise.
- Financial stability implications: bank disintermediation risk; design trade‑offs between limiting disintermediation and achieving inclusion.
- Empirical note: panel analysis (47 countries) shows e‑money growth linked to stronger monetary policy transmission and financial intermediation in low inclusion contexts.

---

### 4. Fast Payment Systems (FPS) — features and regional role
- Definition: infrastructure for clearing/settling payments quickly and continuously (24/7 real‑time or near real‑time).
- Distinction from CBDC: FPS are settlement infrastructure; CBDC embeds money and settlement features, can be programmable and riskless.
- Central bank roles: catalyst, overseer, operator, or mixed arrangements.
- IMF survey findings:
  - FPS accessible via mobile/internet in >80 percent of countries.
  - In >70 percent of responding countries, national ID required to access FPS.
  - FPS maintained by private sector in two‑thirds of countries; regulated by central banks in most.
- Case: PesaLink (Kenya) launched 2017; deferred net settlement through RTGS; compounded annual growth rate ≈ 36 percent (volume and value) from 2017 to 2020.

---

### 5. Private Mobile Money — adoption, impact, regulation
- Adoption and impact:
  - Mobile money account penetration increased by over 200 percent between 2015 and 2021 in surveyed countries.
  - Mobile money transactions in 2021: nearly 45 percent of GDP in sub‑Saharan Africa; 18 percent in rest of world.
  - In 16 reported countries, mobile money accounts were on average nearly twice as many as traditional deposit accounts in 2021; surpassed traditional deposit accounts in 10 of 16 economies.
  - Share of adults with mobile money account: 33 percent; of account holders, 43 percent use mobile payments for P2P, P2M, G2P, P2G, wages, agricultural payments.
- Major providers: M‑PESA (launched 2007; seven countries; >50 million active users; >1 billion transactions per month; conduit for over US$1.5 billion in remittances), MTN Mobile Money, Orange Money, Airtel Money, EcoCash, Tigo Cash, GloCash.
- Fintech funding: fintech raised US$2.3 billion (53 percent of startup funding) in 2021; fintech revenues in Africa estimated US$4 to US$6 billion in 2020.
- Regulation and risks:
  - GSMA scores: Transaction limits 96.9/100; CDD (KYC) 53.5.
  - EMIs engaged in lending should be regulated comparably to lending institutions; customer funds should be segregated and invested in safe assets (bank accounts, government assets, or central bank reserves).
  - Need to protect cash acceptance, ensure interoperability, and scale supervisory capacity if mobile money becomes systematically important.
- Example: Novissi (Togo) disbursed more than US$22 million to 600,000 beneficiaries during COVID‑19.

---

### 6. Crypto Assets — adoption drivers, risks, policy measures
- Adoption drivers: hedge against currency volatility, inflation, macro instability; remittance cost reduction; speculative returns.
- Adoption patterns:
  - Crypto transactions peaked at US$20 billion per month in mid‑2021 (global/regional context).
  - Top adopters (2022 index): Kenya, Nigeria, Togo, Ghana, South Africa, Cameroon, Dem. Rep. of the Congo, Benin, Mozambique, Zambia, Côte d’Ivoire.
  - Crypto flows (Mar‑2022 to Mar‑23) top 20 inflow countries include South Africa, Nigeria, Ghana, Kenya, Mauritius, Ethiopia, Côte d’Ivoire, Angola, Seychelles, Tanzania, Zimbabwe, Senegal, Mozambique, Benin, Cameroon, Madagascar, Uganda, Zambia, Rwanda, Namibia.
- Regulatory stance:
  - One‑quarter of countries formally regulate crypto; two‑thirds implemented some restrictions; Ethiopia, Sierra Leone, and Tanzania banned crypto.
- Risks:
  - Excess volatility; circumvention of capital controls; financial stability; tax erosion; ML/TF vulnerabilities; limited consumer protection; operational fraud and scams.
  - Fully backed stablecoins present lower valuation risk but are not risk‑free.
- Policy recommendations:
  - Do not adopt crypto as official currency or legal tender.
  - Develop comprehensive regulatory and supervisory frameworks: prudential, conduct, oversight for exchanges, tax clarity, AML/CFT, CDD, distinguish fully backed stablecoins from unbacked crypto.
  - Interim targeted restrictions where frameworks absent; avoid blanket bans except where enforcement/capacity severely limited.
  - Promote alternative digital solutions (CBDC, FPS, mobile money) and macro stability to reduce incentives for crypto adoption.

---

### Annexes — empirical determinants and remittances
- Annex 2 (Robust determinants of crypto adoption) — regression coefficients (Log of (1 + Crypto Volumes/GDP)):
  - Inflation (log): 1.994
  - Control of corruption index: −1.116
  - Real GDP growth: 0.294
  - Remittances (% GDP): 3.025
  - GDP per capita (log): 0.93
  - Bank deposits to GDP: −1.281
  - Unemployment rate: −0.401
  - Share population 15–24: 0.306
  - Population (log): −3.127
  - Secure internet server users per million (log): 3.691
  - Chinn Itoh Index: −1.47
  - GDP volatility (SD of log GDP): 0.308
  - Uncertainty Index: −1.09
  - Informal employment (% GDP): 1.139
  - Urban population share: −0.455
  - Trade openness: 0 .116
  - Manufacturing VA to GDP: 0.206
  - Number of historical inflation crises: −0.916
  - People borrowing from a financial institution (% age 15+): 0.344
  - Growth of gross government debt: 0.0836
  - Exchange rate volatility: −0.449
  - Constant: −0.868
  - Observations: 105
  - Note: regressors in bold in source considered “robust” by t‑statistic criteria.
- Annex 3 (Remittances):
  - SSA received over US$50 billion in remittances in 2022.
  - Cost of sending remittances to SSA: average 8 percent in 2022; SDG 2030 target is 3 percent.
  - If remittance costs at SDG target, low‑income households would receive about US$2.5 billion more per year (benchmark 2022).
  - Average cost of sending US$200 in cash to SSA (2022): US$18.30 (foreign exchange margin US$5.70).
  - Average cost of sending US$200 digitally (2022): US$10.32 (foreign exchange margin US$3.62).
  - Average bitcoin remittance cost example: as low as 2.9 percent (IMF 2023d) but last‑mile and conversion costs limit practicality.

---

### Annex case study — eNaira (Annex 6)
- Launch date: October 25, 2021.
- Design: Direct liability of CBN; proprietary DCMS by Bitt Inc.; Hyperledger Fabric ledger; account‑based blockchain.
- Phased rollout:
  - Phase 1: banked customers only.
  - Phase 2 (August 2022): expanded to people without bank accounts (with NIN or phone) and USSD users.
- Tiered wallet ceilings (selected):
  - Tier 0: Daily transaction limit N20,000; Balance limit N120,000 (phone number required; no ID).
  - Tier 1: Daily transaction limit N50,000; Balance limit N300,000 (phone number + NIN verification).
  - Tier 2: Daily transaction limit N200,000; Balance limit N500,000 (BVN required).
  - Tier 3: Daily transaction limit N1,000,000; Balance limit N5,000,000 (full CDD).
  - Merchant: No limit (full CDD).
- Key metrics:
  - Retail wallet downloads: 942,000 (end of November 2022) = 0.8 percent of active bank accounts.
  - Total eNaira retail transactions since inception: about 802,000.
  - Naira exchange rate (end‑2023): 901.43 Naira/USD.
  - Crypto inflows (Nigeria July 2022–June 2023): US$56 billion (Chainalysis).
- Observations: low early adoption, limited merchant acceptance, strategic choice to complement or compete with mobile money; importance of macroeconomic context (official vs parallel FX spreads) for remittance channel viability.

### Bank of Ghana eCedi pilot (Annex material)
- Pilot: started September 2021.
- Pilot results (BoG 2024): Total transactions GHS 473 million (value) and 96,000 (volume).
- Offline transactions: 0.004 percent of transaction value; 0.475 percent of transaction volume.
- Consumer research: strong trust; reported affordability, user‑friendliness, safety, availability.

---

### Key policy recommendations (Section 7 consolidated)
- Address infrastructure and ID coverage; invest in digital and financial literacy; favor offline solutions where needed.
- Promote enabling regulatory frameworks for private digital payments; ensure EMIs meet capital and safekeeping requirements; require deposits invested in safe assets.
- Promote interoperable FPS and ensure private‑public complementarity; consider CBDC only when persistent market failures exist or strategic rationale clear.
- Design CBDC with safeguards: legal basis, AML/CFT, privacy, caps, tiering, nonremuneration or limited remuneration, API access for PSPs; prioritize pilots and capacity building.
- Regulate crypto assets: avoid legal‑tender adoption; adopt prudential, conduct, oversight, AML/CFT regimes; license fully‑backed stablecoins with reserve and redemption standards; consider targeted restrictions where frameworks absent.
- Leverage digitalization in public finance: use mobile money/FPS/CBDC for transfers and taxes; explore fractionalization of government debt and AI to improve credit scoring and climate finance.
- Regional cooperation: harmonize legal/regulatory approaches, pursue interoperability, coordinate supervision, address cross‑border payment efficiency and trade integration.
- Maintain sound macroeconomic policies as the essential foundation for digital reform to preserve monetary sovereignty, policy effectiveness, and public trust.

---

*Source: Executive Summary, "Digital Payment Innovations in Sub‑Saharan Africa" (IMF Departmental Paper; content unit: dpdpiea - Executive Summary).*

### Executive Summary.................................................................................................v

### Executive Summary

### Major themes and scope
- Digital Payment Innovations in Sub-Saharan Africa, including:
  - Digital Payment Landscape (Section 2)
  - Central Bank Digital Currency (CBDC) in Sub-Saharan Africa (Section 3)
  - Fast Payment Systems (FPS) in Sub-Saharan Africa (Section 4)
  - Private Mobile Money in Sub-Saharan Africa (Section 5)
  - Crypto Assets in Sub-Saharan Africa (Section 6)
  - Policy Recommendations to Strengthen the Digital Payments Ecosystem across Sub-Saharan Africa (Section 7)
- Structural context and drivers:
  - Structural Features of Sub-Saharan African Economies (Section 1.B)
  - Key Issues for the Development of Digital Innovations in Sub-Saharan Africa (Section 1.C)
- Cross-cutting public finance and international dimensions:
  - Leveraging Digitalization in Public Finance (Section 7.E)
  - Synergies of Digital Finance with Capital Flows, Climate Financing, and AI (Section 7.F)
  - Collaborating across Borders to Enhance Efficiency and International Interoperability of Payment Systems (Section 7.G)
  - Sound Macroeconomic Policy as the Essential Foundation for the Digital Reform Agenda (Section 7.H)

### Policy recommendations and governance topics (Section 7 and subitems)
- Addressing structural impediments and bottlenecks for the development of efficient digital payment innovations (Section 7.A)
- Mitigating specific risks (Section 7.B)
- Supporting private sector development and innovations through the promotion of an enabling, competitive, and safe environment (Section 7.C)
- Exploring public sector digital payment innovations—including CBDC—as complements rather than substitutes for private sector digital solutions (Section 7.D)
- Leveraging digitalization in public finance (Section 7.E)
- Synergies with capital flows, climate financing, and AI (Section 7.F)
- Cross-border collaboration to improve efficiency and interoperability (Section 7.G)
- Emphasis on sound macroeconomic policy as foundational (Section 7.H)

### Case studies, country experiences, and annex topics
- Annex 1. CBDC as Complement or Substitute to Private Mobile Money? (Annex 1)
- Annex 2. Robust Determinants of Crypto Asset Adoption (Annex 2)
- Annex 3. Digital Payment Innovations and Remittances (Annex 3)
- Annex 4. Regional Trade Benefits (Annex 4)
- Annex 5. The Emergence of Digital Assets, CBDC, and Informality in SSA (Annex 5)
- Annex 6. eNaira: Initial Stocktaking (Annex 6)
- Annex 7. South Africa’s Fast Payment System: PayShap (Annex 7)
- Annex 8. Digital Social Safety Net: The Case of Togo and Lessons Learned (Annex 8)
- Annex 9. WAEMU Digital Payments and the BCEAO’s New Fast Payment System PI-SPI (Annex 9)
- Annex 10. Digital Payments Landscape in CEMAC (Annex 10)
- Annex 11. Lessons and Experiences from Countries That Adopted Crypto Assets as Legal Tender: The Case of the CAR (Annex 11)
- Annex 12. Bank of Ghana’s Experience with eCedi Pilot (Annex 12)

### Empirical and analytical artifacts listed
- Figures illustrating infrastructure, inclusion, fintech development, remittances, crypto adoption, CBDC status, and institutional readiness:
  - Figure 1 through Figure 8 (see list)
- Boxes presenting international and regional experiences and thematic analyses:
  - Box 1 through Box 7 (see list)
- Additional figures and box figures across chapters and annexes, including:
  - Box Figure 3.1, Box Figure 5.1, Box Figure 5.2, Figure 9, Figure 10, Figure 11, Figure 12, and multiple Annex Figures (listed in the content inventory)

### Structure and intended analysis
- The document includes an Introduction (Section 1) with subsections:
  - A. Digital Payment Innovations in Sub-Saharan Africa (Section 1.A)
  - B. Structural Features of Sub-Saharan African Economies (Section 1.B)
  - C. Key Issues for the Development of Digital Innovations in Sub-Saharan Africa (Section 1.C)
- Chapters 2–6 provide topical analyses of the current landscape and specific technologies (FPS, CBDC, mobile money, crypto)
- Chapter 7 consolidates policy recommendations across thematic areas, from structural reforms to risk mitigation and international cooperation
- Annexes provide country case studies, empirical robustness checks, and implementation lessons relevant to policy design and operational considerations

*Source: Executive Summary, "Digital Payment Innovations in Sub-Saharan Africa" (IMF Departmental Paper; content unit: dpdpiea - Executive Summary).*

### Executive Summary

### Executive Summary

### Overview
- Paper scope: takes stock of developments and policy issues related to digital payment innovations across sub-Saharan Africa, focusing on Central Bank Digital Currencies (CBDCs), fast payment systems (FPS), private mobile money, and crypto assets.
- Potential benefits: complementarity and substitutability for boosting financial inclusion (particularly unleashing a digitally enabled youth), improving financial sector efficiency, and lowering transaction costs.
- Core tension: realizing benefits requires addressing heightened challenges in the region—limited financial development, lack of information technology (IT) resources, and constraints on central bank capacity—while managing risks, especially those arising from crypto assets.
- Goal: offer tailored recommendations related to policy, regulation, and design to enhance financial efficiency and inclusion, promote interoperability domestically and across borders, and support innovations such as smart contracts, tokenization, and fractionalization while minimizing risks to financial stability.

### IMF Survey Findings
- About 75 percent of surveyed sub-Saharan African central banks are exploring CBDCs for their potential to boost financial inclusion and improve the efficiency of domestic payments.
- Key perceived CBDC benefits: reducing transaction costs and facilitating remittances.
- Fast payment systems and mobile money: viewed as "quick wins" despite heterogeneous development across the region.
- Crypto asset use: limited and concentrated in a few countries; many central banks lack adequate frameworks to regulate them.
- Survey implication: scope exists to improve the digital payment landscape, leading to a more competitive and efficient financial sector, better-regulated fintech activities, deeper financial development, and more efficient cross-border payments to support regional trade integration and exports.

### Sub-Saharan Africa–Specific Characteristics
- Structural impediments: low mobile and internet penetration, unreliable electricity supply, large IT skill gaps, low financial and digital literacy, and slow and costly payment systems (notably for cross-border transactions).
- Financial structure: high informality, low financial inclusion, shallow financial systems, weak traditional banking penetration.
- External and fiscal context: remittances are a vital source of household (HH) income and external financing and are affected by high transaction costs; many countries rely on capital flow management measures, including those for reserve management.
- Public sector constraints: significant capacity and resource constraints in public administrations; human and physical costs of developing new financial instruments are large.
- Revenue context: tax revenue-to-GDP ratio remains low, often reflecting extensive informality and the need for more efficient collection and administration.

### Prominent Risks in Sub-Saharan Africa
- Financial integrity risks: potential threats to ML/TF and corruption considerations; these could be exacerbated by growing crypto asset use, weak regulatory capacity, and limited financial education.
- Operational and infrastructure risks: network failures, internet disruptions, business continuity, and cybersecurity breaches exacerbated by inadequate infrastructure and weak capacity.
- Adoption and design risks: limited trust and poor adoption increase reputational risks; rapid obsolescence of technological platforms and interoperability challenges aggravated by poor design and fast technological progress.
- Macroeconomic and cross-border risks: banking disintermediation, financial instability, weaker monetary policy transmission, currency substitution, capital account volatility—partly associated with inadequate instrument design or regulation—would be aggravated by weak macroeconomic stability in some countries.

### High-level Recommendations for Specific Innovations
- Private mobile money:
  - Support adequate development through establishing a robust operating environment.
  - Develop an adequate regulatory environment that lowers barriers to entry and promotes interoperability to stimulate competition and portability among digital payment providers.
  - Minimize user risks and ensure system robustness to operational risks; mobile money deposits need to be adequately backed; digital lenders need regulation comparable to other lending institutions.
  - Digital payments via mobile phones could help reduce informality and support better tax collection (extent depends on quality of public financial management and legal frameworks).
- Fast payment systems (FPS):
  - Intensify efforts to leverage FPS to improve payment speed, reduce transfer costs, and encourage wide adoption of rapid and affordable digital payment options.
  - Promote competition and interoperability across different payment providers, including mobile money services.
  - FPS seen as a key form of public–private collaboration to expand digital payment access beyond traditional means and enable technological leapfrogging.
- CBDCs:
  - Can complement and support private mobile money and FPS when well-identified market failures or strategic reasons require public intervention.
  - Many CBDC motivations (including greater financial inclusion) could often be addressed with private payment systems or other public policy interventions; countries could generally prioritize adequate FPS and well-regulated competitive private mobile payments.
  - Central banks should assess specific market failures a CBDC can uniquely address, evaluate strategic rationales, gauge benefits against costs and risks, and consider alternative solutions, available resources, technical capacity, and macroeconomic conditions.
  - Important considerations: adequacy of technological infrastructure, internet connectivity, IT skills, and financial and digital literacy; sound legal basis and effective regulatory framework to contain risks to bank disintermediation, monetary transmission, capital flows, and financial stability; mitigation of operational, cyber, and privacy risks; manage reputational risk and possible limited trust and poor adoption with communication policies and sound macro policies.
- Crypto assets:
  - Should not be adopted as official currency or legal tender.
  - Develop and enforce comprehensive regulations and institutions, including prudential, conduct, and oversight requirements for crypto market actors (including local exchanges), to contain risks related to financial, external, and fiscal stability.
  - Regulatory environment should distinguish between fully backed crypto assets and those that are not, as the former present lower risks for consumers and the financial system.
  - Avoid granting crypto assets official currency or legal tender status because it would raise significant macrocritical legal issues and impair monetary sovereignty and monetary and financial stability.

### Four Priority Sets of Policy Action
- Priority set 1: Address structural impediments and bottlenecks
  - Improve access to electricity, internet, and mobile networks to enable wider and safer access to digital payments and deepen financial inclusion.
  - Favor technological solutions that allow for offline capabilities for digital payments where internet/mobile connectivity is limited, while mitigating risks.
  - Expand coverage of national and digital IDs to broaden access to digital systems and facilitate addressing financial integrity and ML/TF concerns.
  - Invest in human capital to promote skills for digital finance development.
  - Deepen financial literacy to promote inclusion, enhance consumer protection, and reduce exposure to consumer fraud.
- Priority set 2: Support robust private digital payment development and interoperable FPS within an enabling, competitive, and secure environment
  - Create an enabling regulatory, operational, and supervisory environment for digital payment systems, services, and providers; develop interoperable platforms and enhance governance and management of data privacy.
  - Subject private digital service providers to similar prudential rules for comparable activities as traditional financing actors; ensure EMIs meet statutory minimum licensing requirements and have sufficient initial capital; customer deposits with EMIs should be invested in safe assets.
  - Safeguard cash provision and the obligation to accept cash to avoid exacerbating financial exclusion.
  - Bring crypto assets into regulatory and supervisory environments and strengthen regulatory capacity; focus on consumer protection and ML/TF considerations; strengthen institutional capacities and legal frameworks for detecting and prosecuting corruption in fragile and conflict-affected states.
  - Address capital flow risks and promote financial education, particularly for older populations and navigation of complex digital products.
  - Be ready to manage potential unanticipated effects on monetary transmission and financial stability (e.g., mobile money balances may respond more significantly and quickly to monetary policy instruments, higher velocity of money, faster shifts in deposits between banks and online PSPs, emergence of large systemic depositors).
  - Safeguard bank intermediation in policy choices regarding mobile money or CBDC (consider fees, interest rates, or limits on amounts).
  - Invest in infrastructure and develop multi-actor systems to mitigate network failure and cybersecurity risks; collaborate with other central banks to contain risks from rapid technological obsolescence and enhance interoperability.
- Priority set 3: Public sector digital innovations as complements, not substitutes, for private solutions
  - Support adequate FPS and competitive private digital payment solutions so public sector digital plans are not seen as competing with mobile money providers and commercial banks.
  - Assess persistence of market failures associated with private digital solutions before developing CBDC or publicly developed FPS.
  - CBDC could be settled on private FPS, ensure greater resilience, reduce fragmentation, and help discipline the market without necessarily being widely adopted.
  - Note: resources to develop, maintain, and update CBDC would be larger than establishing an adequate FPS; there is a lack of an international standard for CBDC.
  - Enhance central bank capacity in digital technologies through peer learning and capacity building.
  - Digitalize public finance to promote regular use of private mobile money or CBDC for public transfers or paying taxes; benefits include expanding digital networks, reducing waste and leakages, improving targeting, improving fiscal transparency, and reducing informality while enhancing tax compliance.
  - Enable fractionalization of government borrowing through digital payment systems to facilitate small-denomination lending and expand savings opportunities for low-wealth individuals; connect fractionalized systems with digital credit and investment vehicles.
  - Leverage artificial intelligence (AI) to accelerate adoption of digital financial solutions and explore synergies with climate financing, crime detection, smart digital contracts, diaspora bonds, and climate-related financing; blockchain technology used by CBDCs and crypto assets can support fractionalization and other initiatives.
- Priority set 4: Cross-border collaboration for efficiency and interoperability
  - Engage in regional (if not global) consultations early to promote interoperability and rely on consistent cross-border legal, regulatory, and technological solutions to avoid proliferation of incompatible systems.
  - Promote regional cross-border flows, reduce regulatory arbitrage, and support trade integration if an interoperable, fast, and efficient regional payment system is realized.
  - Interconnection with domestic credit history records would promote cross-border lending and international financial integration.
  - Continue addressing volatility of capital flows and sudden stops via appropriate macroeconomic policies and ongoing capital flow management measures, alongside regulation of new digital financial instruments.
  - International collaboration is crucial for addressing interoperability and managing rapid obsolescence of technological platforms.

### Final policy context
- Digital reform must be placed within sound macroeconomic policies and adequate governance arrangements to buttress confidence in the local currency and economy, and to foster consumer trust and protection.
- Designing an effective digital development plan and regulatory framework alone is insufficient; complementary sound macro policies are essential to ensure financial development and stability.

*IMF Departmental Papers • Digital Payment Innovations in Sub-Saharan Africa — Executive Summary*

### 1. Introduction

### dpdpiea - 1. Introduction

### Overview
- Digital innovations are rapidly changing the payment and financial landscape in sub-Saharan Africa, creating opportunities to improve financial inclusion, lower the cost of remittances, reduce informality, deepen the financial system, facilitate cross-border payments and trade, and improve tax collection and other public services.
- These innovations are associated with risks and policy trade-offs—heightened by structural features that differentiate sub-Saharan Africa from other regions, including limited traditional financial development, weak digital infrastructure, lack of national ID, low financial literacy, reliance on remittances and cash, limited central bank capacity and resources, weak regulatory frameworks, reliance on capital control, capital account volatility, and risk of currency substitution.
- Efficient private digital solutions may not develop organically everywhere; widespread crypto adoption in the absence of regulation can heighten risks; Central Bank Digital Currency (CBDC) can complement private digital innovation but presents institutional, resource, stability, and operational challenges; there is significant scope to improve interoperability among sub-Saharan African digital platforms.

### A. Digital Payment Innovations in Sub-Saharan Africa
- Rapid digitalization and improvements in IT infrastructure, internet access, and mobile technology have revolutionized payments.
- Mobile money is widely used across the region, with significant uptake in East Africa; nearly half the countries in the region have adopted fast payment systems (FPS) for instantaneous, around-the-clock bank-to-bank transfers (World Bank n.d.).
- Crypto assets have made considerable headway in countries such as Ghana, Kenya, Mauritius, Nigeria, Seychelles, and South Africa; crypto assets were temporarily given legal tender status in the Central African Republic (CAR).
- The public sector is adopting innovations: many central banks are exploring CBDC and Nigeria launched the eNaira in 2021.
- Potential benefits of digital payments (selected):
  - Improve financial inclusion where traditional banking is less developed.
  - Lower the cost of receiving remittances.
  - Reduce informality and deepen shallow financial systems.
  - Decrease the cost of cross-border payments and facilitate cross-border financing via interoperable systems and digital solutions (including for customs procedures and digital credit assessment).
  - Reduce the cost of managing cash, enable timely and targeted public sector transfers, and facilitate tax payments—potentially raising low tax revenue-to-GDP ratios.
  - Enhance intra- and inter-regional trade and reduce dependency on correspondent banks outside Africa.
  - Generate e-payment data that can serve as “digital collateral” to reduce information asymmetries and increase access to credit for SMEs and households (examples cited: India, South Africa, Zambia).
  - Expand trade finance opportunities for MSMEs via digital platforms for letters of credit.
  - Enable blockchain features (smart contracts, tokenization, fractionalization) and broader financial developments (digital credit systems, digital investment vehicles).
  - Spur wider digitalization, strengthen digital and financial literacy—particularly among youth—and support new economic activities (freelancing, ridesharing, e-commerce).
  - Support “green innovation” via environmentally sustainable mechanisms underlying digital finance.

- Cross-border payments landscape:
  - Cross-border payments are primarily driven by individuals and MSMEs.
  - Prevailing models: correspondent banking, closed-loop systems, and aggregators.
  - Payment channels include bank transfers, mobile money, digital wallets, money transfer operators, cash in small-scale cross-border trade (SSCBT), and informal intermediary-based transactions.
  - Instant cross-border payment systems have started operations in multiple initiatives (examples include PAPSS, GIMACPAY, SADC-RTGS, BUNA).

- Operational challenges and macroeconomic risks:
  - Challenges: poor financial literacy, capacity constraints, low internet and mobile penetration, internet disruptions, rapid obsolescence of platforms, network failures, and interoperability uncertainty.
  - Concerns: consumer protection, privacy loss compared with cash, competition, governance, ML/TF (money laundering/terrorism financing), cybersecurity, reputational risks, and poor adoption.
  - Macroeconomic implications: banking disintermediation, financial instability, altered monetary policy transmission, possible currency substitution, bypassing capital controls, capital account volatility, and potential loss of seigniorage from higher velocity of money in circulation.

### B. Structural Features of Sub-Saharan African Economies
- Distinguishing characteristics:
  - Low financial development and financial inclusion; shallow financial systems; weak traditional banking penetration.
  - High informality and significant dependence on remittances with high transaction costs.
  - Extensive use of capital flow management measures, including for reserve management.
  - Low tax revenue-to-GDP ratios, reflecting informality and inefficiencies in collection/administration.
- Structural impediments to digital payment adoption:
  - Deficiencies in digital infrastructure: mobile connectivity, internet penetration, and high internet costs.
  - Unreliable electricity supply, large IT skill gaps, low financial and digital literacy, slow and costly payment systems (especially cross-border).
  - Weak public administration capacity and large human/physical costs for developing new financial instruments.
  - Lack of national and digital ID among a significant share of the population and poor data privacy governance.
- Evidence from COVID-19: countries that had pre-pandemic investments in digital public infrastructure (including ID, payments, and trusted data sharing) were better able to implement COVID-response social assistance programs (World Bank 2022).

- Policy implication:
  - Because sub-Saharan Africa’s features differ from other regions, policy recommendations must be tailored—supportive investments are needed to raise human capital quality (digital and financial literacy), scale up energy supply, and improve internet connectivity.

### C. Key Issues for the Development of Digital Innovations in Sub-Saharan Africa
- The paper focuses policy recommendations on four digital innovations: CBDC, fast payments, private mobile money, and crypto assets. Key issues identified:
  - Issue 1: Quality and stable private mobile money may not develop organically everywhere.
    - Risks: slow adaptation, service provider failure, systemic concentration and market power via network effects in often closed systems, monopolistic pricing and standard-setting, and data-collection advantages.
    - Implication: need for consumer protection, regulatory scrutiny, and measures to ensure competition and fairness.
  - Issue 2: Digital payment instruments entail unique risks including for financial stability.
    - Risks: financial disintermediation if digital wallets are funded from bank deposits (reducing credit creation), rapid withdrawals triggering instability, and higher ML/TF risks where regulatory oversight is limited.
  - Issue 3: Widespread crypto asset use could pose broader risks absent strong regulatory oversight.
    - Drivers of crypto demand: privacy, speculation, avoiding sanctions, perceived superior risk-adjusted returns versus local assets in macro-unstable environments.
    - Risks: “crypto dollarization” undermining monetary sovereignty and transmission (especially if legal tender), crypto volatility causing capital outflows, exchange rate volatility, financial instability, large user losses raising consumer protection concerns, and significant public finance risks if governments accept/hold crypto assets.
  - Issue 4: Developing CBDC presents institutional, resource, stability, and operational challenges.
    - Constraints: central bank institutional and resource capacity, operations of novel and untested infrastructure, cybersecurity, financial stability, ML/TF risks, and potential limitations to domestic and international interoperability.
    - Risk of premature CBDC creation: technological obsolescence and limited interoperability given evolving global standards; trade-off between privacy loss (versus cash) and efficiency gains.
  - Issue 5: Digital platforms across sub-Saharan Africa lack integration.
    - Multiple subregional settlement platforms exist (examples: EAPS, SADC-RTGS, WAMZ Payments System, Central Africa Payment System, REPSS) but interoperability across platforms and countries is limited.
    - Collaborative efforts are underway (examples: PAPSS, Association of African Central Banks work) to integrate payment systems.

### Structure of the paper (as described)
- Section II: heterogeneous digital payment landscape, traditional access to finance shortcomings, high and costly remittances, structural impediments.
- Sections III–VI: potential benefits and risks for each innovation—CBDC (III), fast payment systems (IV), private mobile money (V), crypto assets (VI).
- Section VII: policy recommendations to boost financial inclusion and improve digital payments efficiency while mitigating macroeconomic, financial stability, and monetary policy risks.
- Section VIII: complementary policies to strengthen each digital payment innovation (CBDC, fast payments, private mobile money, crypto assets).

*Source: dpdpiea - 1. Introduction — https://www.imf.org/-/media/files/publications/dp/2025/english/dpdpiea.pdf*

### 2. Digital Payment Landscape

### 2. Digital Payment Landscape in Sub-Saharan Africa

### Digital infrastructure and access
- Aggregate penetration of cellular subscriptions reached about 80 subscriptions per 100 people in 2021.
- The region had 489 million unique mobile subscribers in 2023, indicating a 43 percent gross penetration rate (GSMA 2023).
- Only 33 percent of the region’s population has internet access, compared with 68 percent in EMs and 90 percent in AEs.
- Active mobile-broadband subscription growth has slowed in recent years, while internet usage continues to surge.
- Enhanced Digital Access Index components show marginal improvements in IT infrastructure, knowledge, affordability, and quality; overall digital readiness remains well below EMs and AEs.
- In 2022, over 400 million of the more than 900 million mobile phone connections in sub-Saharan Africa were relying on a basic or feature phone (GSMA 2023).

### Mobile money and fintech adoption
- Private mobile money is a major driver of digital financial access, with sub-Saharan Africa home to almost three-fourths of the world’s mobile money accounts.
- In 2023, more than 70 percent of growth in registered mobile money accounts was in sub-Saharan Africa (GSMA 2024).
- Number of mobile money transactions per adult increased more than sixfold during 2013–21, from 10 to over 60 transactions per adult.
- Total value of mobile money transactions as a share of GDP rose from just under 10 percent in 2015 to more than 40 percent in 2021.
- Mobile money platforms now offer services beyond payments—savings accounts, mobile banking, loans, and insurance—furthering financial inclusion.
- Mobile money agents extend reach to remote areas by enabling cash-in/cash-out (CICO) and customer support with minimal infrastructure, offsetting shortages of ATMs and bank branches.
- Many mobile financial services operate on basic/feature phones, reducing the need for smartphones.

### Financial inclusion, informality, and remittances
- Only 33 percent of adults in sub-Saharan Africa had an account at a formal financial institution in 2020 (Global Findex).
- As a gateway to financial inclusion, 34 percent of adults rely on mobile money for transactions.
- Informality is high: about 70 percent of employment is informal in sub-Saharan Africa.
- External remittances provide a stable external funding source, accounting for about 2.5 percent of GDP—higher than for EMs.
- Nearly half the population in sub-Saharan Africa received domestic remittances in 2021–22, and about two-thirds of those remittances were sent through digital means.
- Remittance costs have declined but remain high:
  - Average cost of sending a transfer of US$500 declined to 9 percent of the value of the transaction in March 2022 from an average of 10 percent in 2011.
  - Costs in the region remain above the 2030 Sustainable Development Goal target of 3 percent.
  - Cross-country heterogeneity in remittance costs ranges from as low as 3 to almost 17 percent.
  - Average remittance costs are significantly higher when using bank and nonbank financial institutions compared with mobile operators.

### Cross-country heterogeneity and regulatory determinants
- Access to private mobile money varies greatly across countries:
  - Registered accounts per 1,000 adults approach 2,000 in Benin, Ghana, Kenya, and Rwanda.
  - Mobile money is at an early stage in countries such as Angola, Comoros, Gambia, and Seychelles; Ethiopia and Equatorial Guinea show near nonexistence.
- Availability of mobile money agents also varies substantially across countries and is critical for inclusion in remote areas.
- Primary drivers of cross-country differences include in-country regulations that either protect traditional banking or enable telecom operators and new technological business models.
- Government policies on financial inclusion and innovation differ widely across the region, producing disparate outcomes in mobile money development.

*Source: IMF Departmental Papers — "Digital Payment Innovations in Sub‑Saharan Africa", chapter 2.*

### 5. They Are Important Sources of Income . . .

### 5. They Are Important Sources of Income . . .

### Remittances: role and origins
- Personal remittances are presented as a significant source of income for sub-Saharan Africa (figures for 1990–2022 shown in source visuals).
- Remittance inflows to sub-Saharan Africa originate mostly from advanced economies (AEs) and sub-Saharan Africa itself (SSA), with a breakdown by origin for 2010–19 displayed in source visuals.
- Sources cited: World Bank, World Development indicators; Allen (2022); World Bank Remittances Database; IMF staff calculations.

### High cost of sending remittances
- The costs of sending remittances are emphasized as high in sub-Saharan Africa (panel: Cost of Sending 500 USD — average for sending from country group, in % of the transaction).
- These costs are noted to be much higher than for other regions (panel: Cost of Sending 200USD to the Following Regions — simple average, percent; SDG target referenced in visuals).
- Sources: IMF staff calculations and The World Bank, Remittance Prices Worldwide; World Bank Remittance Prices and IMF staff calculations.

### Heterogeneity across countries and intermediaries
- There is significant heterogeneity in remittance costs across source countries (Average Remittance Costs by Source Country, 2020–22; countries listed include Angola, Tanzania, Nigeria, Cameroon, South Africa, Rwanda, Kenya, Ghana, Senegal, Cote d'Ivoire).
- There is also heterogeneity across intermediary firm types (Average Remittance Costs by Firm Type, 2020–22; firm types include Non-Bank FI, Bank, Post office, Money transfer operator, Mobile operator).
- Source: World Bank Remittances Price Worldwide and IMF staff calculations.

### Crypto assets: adoption and regulatory stance
- Crypto adoption has gained some momentum in the region; crypto transactions peaked at US$20 billion per month in mid-2021.
- Bitcoin and Ethereum are identified as the region’s two most common crypto assets.
- Top 10 crypto adopters (2022 index, scale 0 to 100) include Kenya, Nigeria, Togo, Ghana, South Africa, Cameroon, Dem. Rep. of the Congo, Benin, Mozambique, Zambia, Côte d’Ivoire.
- Regulatory landscape:
  - Only one-quarter of sub-Saharan African countries formally regulate crypto assets.
  - Two-thirds have implemented some restrictions (including CEMAC countries).
  - Ethiopia, Sierra Leone, and Tanzania have banned crypto assets altogether.
- Risks noted: crypto assets are used for payment, speculative transactions, and money laundering; they can attract users seeking anonymity and create regulatory challenges.
- Sources: Chainalysis 2022; IMF staff calculations; IMF AFR Regional Studies Division “Country Teams Survey.”

### Central Bank Digital Currencies (CBDCs) and public-sector digital finance
- CBDCs are being considered or piloted in the region; Nigeria issued the eNaira as the first CBDC in the region and made it available by phases to individuals without bank accounts but with a national identification number or a phone number to link wallets to identification for AML/CFT compliance.
- Sixteen other national central banks in the region are either piloting or researching CBDCs (Figure 7 visual: status of CBDC development in sub-Saharan Africa).
- Country-specific notes:
  - Ghana: in an advanced stage of CBDC development; pilot stage of the eCedi (see Annex 12 in source).
  - South Africa: piloted two domestic and one international CBDC; decided to place a hold on launching domestic CBDCs while still considering an international CBDC in the coming five years (survey).
  - WAEMU and CEMAC are exploring regional CBDCs.
- Source: Ricci and others (2024).

### Boxed example — China’s experience with CBDC (e-CNY)
- Timeline and rollout:
  - 2014: PBC started DCEP research project.
  - end of 2019: pilot programs initiated in four cities (Shenzhen, Suzhou, Xiong’an, Chengdu).
  - early 2021: pilots broadened to seven regions.
  - January 2022: e-CNY app launched on major app stores.
  - March 31, 2022: pilot expanded to an additional 11 cities.
  - As of December 31, 2024: 200 million individual wallets opened through the app; cumulative transactions reached RMB 9.4 trillion.
- Design and architecture:
  - e-CNY is legal tender, a digital form of central bank currency, mainly a substitute for cash in circulation (M0), coexisting with physical RMB.
  - Operates under a centralized management model and a two-tier operating system: Tier 1 (PBC) for issuance and infrastructure; Tier 2 (commercial banks and payment service providers) for customer-facing services.
  - Supports both account-based and value-based models; enables wallet-to-wallet transfers and offline/value-based token transactions.
  - Designed to complement, not replace, commercial wallets (WeChat Pay, Alipay); e-CNY does not bear interest.
- Cross-border initiatives:
  - Participation in Project mBridge (BIS Innovation Hub, Bank of Thailand, Central Bank of the UAE, PBC, HKMA) — multilateral local currency settlement infrastructure.
  - BIS assessment: mBridge can improve the transaction process, reducing cross-border payment costs by 50 percent.
  - e-CNY interoperability examples: already interoperable with Faster Payment System (FPS) in Hong Kong SAR; collaborations ongoing with Laos and Singapore.
- Design intent: accommodate retail and wholesale use cases, support interoperability, and limit financial disintermediation.
- Byline: By Yibin Mu.

### Digital landscape constraints and institutional gaps
- National identification systems:
  - In 2021, only 65 percent of the population in sub-Saharan Africa were enrolled in national identification systems.
  - This is much lower than in EMs and AEs, and lower than the 75 percent average in low-income countries (LICs).
  - Within region variability: a few countries (South Africa and Zambia) are above the EM average; Mauritius above the AE average; most countries are below the LICs average (country panel listing includes SSD, LBR, TGO, BEN, MOZ, GIN, TZA, SLE, COG, MLI, CIV, UGA, GAB, SEN, CMR, BFA, MWI, ZWE, GHA, NAM, KEN, ZMB, ZAF, MUS).
  - Sources: International Telecommunication Union; IMF staff calculations.
- Financial sector regulation and supervision:
  - Sub-Saharan Africa faces challenges in regulation and supervision; mobile money regulation issues arise from protecting banking status quo vs telecom operators and from transplanting bank regulations to mobile money operators.
  - Mobile operators often bear less risk than banks for intermediation, leading to potential overregulation.
  - Source: Greenacre 2018.
- Monetary policy frameworks:
  - Monetary policy frameworks in sub-Saharan Africa are catching up on independence and accountability and on policy and operational strategy, but lag significantly on communications (IAPOC index, 2018; index 2007=100; SSA sample covers 11 countries that account for 65 percent of region GDP).
  - Source: Unsal, Papageorgiou, and Garbers 2022; IMF staff calculations.
- Digitalization-related legislation:
  - Very few sub-Saharan African countries have legislation covering e-transactions, cybercrime, and data protection and privacy (digital legislation, 2021 panel).
  - Source: UNCTAD and IMF staff calculations.
- Fiscal capacity and capital controls:
  - Persistently low fiscal revenues as a percent of GDP (even relative to LICs) limit investment in digital-friendly institutions (Revenue percent of GDP panel).
  - Capital controls are pervasive and remain higher than in EMs (Overall Capital Control Restriction Index panels). Sources: IMF Fiscal Monitor Database; Fernández and others (2016).

_Italic: IMF DEPARTMENTAL PAPERS • Digital Payment Innovations in Sub-Saharan Africa (content unit: “5. They Are Important Sources of Income . . .”)_

### 3. CBDC in Sub-Saharan Africa

### 3. CBDC in Sub-Saharan Africa

### Overview and context
- The choice to adopt Central Bank Digital Currency (CBDC) and the pace of introduction should be informed by country-specific context and consultation with stakeholders.
- Priority: develop an adequate fast payment system (FPS) and promote a well-regulated and competitive private payment system while exploring complementary roles for CBDCs.
- Important preparatory steps: thorough analyses of opportunities and risks (including macrofinancial effects and implications for legal and regulatory frameworks), capacity development, technical pilots, and a clearly defined road map from research and design to deployment and oversight.
- International collaboration can help leverage other countries’ experiences and promote cross-border interoperability.

### CBDC definitions and variants
- CBDC is a digital form of fiat money, free from liquidity and credit risks.16
- Two common variants:
  - Retail CBDC: designed for general public use (“digital cash”); direct liability of the central bank; legal tender; medium of exchange, store of value, unit of account; credit and liquidity risk-free relative to private digital monies.
  - Wholesale CBDC: designed for financial institutions and other central banks for interbank transactions, settlements, and securities trades.17

### Regional engagement, status, and timelines
- Survey (IMF African Department) findings:
  - Over 75 percent of the countries surveyed are currently engaged—or are planning to be engaged—in CBDC research, development, or pilot activities.
  - Of these:
    - Roughly two-thirds are in the research phase.
    - Slightly over one-third are planning to conclude pilots within the next two years.
    - More than a quarter are actively preparing for a CBDC launch by 2028.
  - Detailed country status:
    - Nigeria already has a CBDC.
    - Ghana and South Africa have advanced to undertake pilots.
    - Cabo Verde, Kenya, Madagascar, Mauritius, Namibia, Rwanda, Tanzania, Uganda, Zambia, and Zimbabwe are at the research stage.
    - Slightly less than a quarter of sub-Saharan African countries are not planning to engage in exploring or developing a CBDC and prefer to wait for broader international experience.
- Regional considerations: heterogeneity of economic structures and policy priorities implies varied timelines and approaches across countries.

### Motivations and public policy objectives
- IMF (2023f) three broad policy objectives for CBDC:
  - Access to payments and financial inclusion.
  - Payment system competition, efficiency, and resilience.
  - Monetary sovereignty as well as monetary and financial stability.
- According to the Survey, top motivations in the region:
  - Enhanced financial inclusion.
  - Domestic payments efficiency.
- Perceived benefits cited by respondents:
  - CBDCs can reach people without bank accounts.
  - CBDC adoption would reduce the cost and time of transactions, with more gains on time.
- Additional public-sector and economic uses:
  - Digitalized distribution of social transfers19, customs and tax collection, and digitalized trade payments supporting intra-regional trade and remittances20.
  - CBDC could help decrease informality and increase public sector efficiency.
- Retail public money (cash, CBDC, or both) remains a cornerstone of the monetary system; absence of retail public money risks fragmentation and market failures due to network effects of payment platforms.

### Design choices, technology, and interoperability
- Key design decision: centralized ledger technology versus distributed ledger technology; a hybrid approach is possible.
- Tokenization, blockchain, and distributed ledger technology are prominent options for enabling programmable CBDCs, asset tokenization, and decentralized financial services.
- Design options for retail distribution:
  - Tiered access: CBDC provided to retail through regulated financial intermediaries.
  - Open, flexible approach: authorizes a broad range of private service providers (including mobile money operators) to deliver services via APIs.21
- Interoperability aims:
  - Ensure seamless switching between private systems and CBDC during outages.
  - Facilitate cross-border interoperability (noting wholesale CBDC potential in cross-border projects).

### Use cases, potential benefits, and complementarities
- Market-failure remediation:
  - In contexts where FPS and mobile operators leave persistent market failures (insufficient cost reduction or coverage), a well-designed CBDC might contribute to financial development and inclusion unless other public tools are more appropriate.
- Cash management:
  - CBDCs can reduce cash distribution costs and infrastructure needs, especially where transportation infrastructure is weak, currency fragmentation exists, or denomination mismatches are acute.
  - Noted examples: Bahamas, India, and Nigeria view CBDC as potentially effective in reducing cash use; Brazil used its fast payment system, PIX, to reduce cash use.
- Business continuity and resilience:
  - CBDCs can act as a fallback during private system disruptions and provide a guaranteed means of payment during crises.
- Competition with private payment solutions:
  - Retail CBDC could compete with or complement mobile money; direct accounts at central banks face hurdles (agent networks, infrastructure).
  - Allowing PSPs to hold CBDCs and access CBDC wallets via APIs could increase competition and efficiency.
- Wholesale CBDC:
  - Typically token-based for large-value interbank transactions and settlements (example: Project Khokha 2 in South Africa; Project Dunbar collaborations).
  - Can streamline settlement, reduce time and cost, and employ DLT.
- Programmability and smart contracts:
  - CBDCs could be designed to execute smart contracts (e.g., payments contingent on delivery), enable targeted social transfers, or restrict use to predetermined expenses.
- Emergent benefits:
  - Some potential benefits may not yet be visible given digital finance dynamism (decentralized finance, asset tokenization).

### Risks, limitations, and alternatives
- CBDCs do not present liquidity and credit risk but can present money laundering/terrorism financing risks; risk levels depend on design, use cases, and ecosystem.16
- Many motivations for CBDC, including financial inclusion, can often be addressed by competitive private payment systems or other public policy interventions; addressing infrastructural bottlenecks (e.g., power outages, limited cellular coverage) may be more appropriate in some contexts.
- Fostering private competition via an adequate FPS and level playing field can support financial inclusion and require fewer human and financial resources than developing a CBDC (also noting lack of international CBDC standard).
- Strong oversight and legal frameworks are essential to prevent market power abuse while supporting innovation, security, and resilience.
- CBDC issuance and distribution require sound legal basis and solid regulatory foundations to ensure legal certainty, monetary and financial stability, and accountability and transparency (see IMF 2020b).

### Implementation guidance and policy recommendations
- Preconditions before launch:
  - Conduct thorough opportunity and risk analyses (macrofinancial, legal, regulatory).
  - Develop capacity and infrastructure.
  - Undertake pilots to test technical feasibility and design choices.
  - Establish a clearly defined road map from research and design to deployment and oversight.
  - Engage a wide range of stakeholders, including the private sector and legislators, to navigate potential conflicts between public objectives and private incentives.
  - Develop communication strategies to highlight benefits and address risks (data privacy, cybersecurity) to build trust and support adoption.
- Leverage private sector strengths:
  - Require interoperability to incentivize rapid private payment system growth and lower consumer costs.
  - Use APIs to allow private service providers to deliver retail services over CBDC infrastructure.
- Consider resource constraints:
  - Where human and financial resources are limited, prioritize strengthening FPS and private sector competition before committing to a CBDC.

### Role and value of pilots
- Pilots enable testing of technologies, products, services, and approaches in real-life environments.
- Benefits of pilots:
  - Realistic assessment of technological and financial feasibility.
  - Avoid reputational risk by road-testing concepts before customer interaction.
  - Offer opportunities for policy experimentation and regulatory discovery beyond technical testing.

*IMF Departmental Paper — Digital Payment Innovations in Sub-Saharan Africa (chapter 3)*

### Box 2. Retail CBDC and the Law

### Box 2. Retail CBDC and the Law

### Legal foundations for retail CBDC
- Retail CBDC issuance and distribution must be based on a sound legal basis and regulatory foundations to ensure certainty, monetary and financial stability, and accountability and transparency.
- Key legal areas involved: central bank law, monetary law, payments law, and private law.

- Central bank law:
  - The central bank’s power to issue CBDC needs to be clearly founded on a solid, ideally explicit, basis in the law.
  - The central bank law should clearly allow the central bank to issue digital currency and not limit this function to banknotes and coins.
  - If a CBDC is qualified, for legal purposes, as account-based, then the law should grant explicit power to the central bank to open accounts for all CBDC holders.
  - Example: Jamaica amended its Bank of Jamaica Act in 2022 to include, in addition to notes and coins, “Central Bank Digital Currency (CDBC).”

- Monetary law:
  - The most important question is whether CBDC is legally qualified as a currency.
  - If it is, giving it the typical key attributes of currency should be assessed, including legal tender status.
  - Example: The Bahamas revised the Central Bank of Bahamas Act in 2020 to grant legal tender status to “electronic money” issued by the central bank.
  - Granting legal tender status to a CBDC that cannot be technically received by the majority of the population could raise fundamental questions related to fairness; exceptions to legal tender status should be assessed.

- Payments law:
  - Launching CBDC may require updating existing payment laws, including ensuring final settlement of CBDC payments or transfer instructions.
  - Payment laws need to address CBDC distribution channels and the regulation of intermediaries involved (for example, wallets, fees on distribution and holding or transaction limits).

- Private law:
  - Sound private law rules (contracts, property) are critical for wide circulation and safe holding of CBDC.
  - If CBDCs are legally designed as token-based (a new legal type of asset), legislative intervention might be needed to clarify legal nature, ownership, transfer, custody, and related security interest rules.
  - Some challenges could be addressed through contracts, but in most jurisdictions comprehensive legislative intervention will be needed.
  - International work: the 2023 Principles on Digital Assets and Private Law by UNIDROIT has paved the way for solutions to navigate some of these challenges.

- Related legal/regulatory adjustments:
  - The introduction of a retail CBDC arrangement may also require some amendments to the AML/CFT legal and regulatory frameworks. (AML/CFT considerations relevant to CBDCs will be addressed in a forthcoming IMF publication on the Financial Integrity Implications of CBDCs.)
  - Practical exemptions (for example, limits on when a payee can refuse digital currency) are possible—see the digital euro regulation example where, for instance, a payee is entitled to refuse digital euro where it is an enterprise that employs fewer than 10 persons, or a natural person acting in the course of a purely personal or household activity, or prior agreement specified a different means of payment.

### Operational, technological, and capacity preconditions and risks (sub-Saharan Africa focus)
- Preconditions for CBDC use (many lacking in sub-Saharan Africa):
  - Well-functioning technological infrastructure to transfer balances and ensure payments are correct, timely, and final.
  - Devices for the general public to make and receive payments.
  - National ID coverage.
  - Internet connectivity and mobile penetration.
  - Financial and digital literacy among customers.
  - Technical expertise among central bank staff to manage a CBDC network 24/7.

- Operational and reputational risks:
  - If not well designed and implemented, CBDC issuance could entail considerable operational and reputational risks.
  - CBDC vulnerabilities include IT outages, cyber-attacks, and ML/TF concerns.
  - Business continuity risks could result in interruptions or disruptions to the CBDC platform and services (business continuity defined as “the process that allows organizations to continue operating during a disruption, ensuring the protection of their processes, assets, and human resources (Consultative Group on Risk Management 2022)”).
  - New operational risks may arise in new technological environments (for example, double spending in offline payments) and evolving financial risks (for example, new forms of counterfeiting, breaching data security and privacy).
  - Operational failures and cyberattacks could undermine central bank reputation, damage credibility, and lead to low trust and user adoption.

- Particular challenges in sub-Saharan Africa:
  - Central bank operational and reputational risks are particularly pronounced due to capacity constraints, making it harder to maintain continuous functionality, resilience, and recovery capabilities.
  - Central banks in the region may be more exposed to cybersecurity risks and have greater difficulty implementing key mitigating policies.

### Financial stability and monetary policy implications
- Structural impacts on financial market structures:
  - Without adequate safeguards, CBDC could alter financial market structures, adversely affecting bank intermediation, liquidity risk, the efficacy of monetary policy, and potentially financial stability.
  - A commonly cited concern is bank disintermediation—CBDC could facilitate rapid shifts in financial holdings away from banks.
  - If CBDC is remunerated, banks’ dependence on more costly deposits could increase, adversely affecting credit availability, with negative implications for monetary policy transmission and financial stability.

- Trade-offs and design mitigants:
  - Design features that can moderate financial disintermediation risks include caps on and nonremuneration of CBDC holdings.
  - These design choices involve complex trade-offs: the more the system is designed to reduce financial disintermediation risks, the fewer gains it may offer in terms of financial inclusion, unless the system captures additional financial participation.
  - Given low financial inclusion in most sub-Saharan African countries, CBDC use could enhance monetary policy implementation and transmission, assuming adoption rates are high.

### Empirical context on e-money and monetary transmission (linked considerations)
- E-money development can have unclear theoretical consequences for monetary policy transmission:
  - E-money can substitute for banks, reducing bank deposits and leading to financial disintermediation.
  - Alternatively, e-money can complement banks by enlarging the pool of depositors and borrowers, leading to higher financial intermediation and stronger transmission of monetary policy rates to bank lending rates.
  - The net effect must be gauged empirically.

- Evidence note:
  - A panel data analysis covering 47 countries shows that the growth of e-money is followed by stronger outcomes in terms of monetary policy transmission, growth in bank deposits and credit, and efficiency gains in financial intermediation.
  - Two channels examined: the credit channel (e-money growth enhances banks’ ability to create credit) and the interest rate channel (effect of e-money on the responsiveness of lending rates).

*IMF Departmental Paper: Box 2. Retail CBDC and the Law.*

### Box 3. Monetary Policy Transmission (Concluded)

### Box 3. Monetary Policy Transmission (Concluded)

### E-money and monetary policy transmission — empirical findings
- All countries, irrespective of initial conditions, experience stronger monetary policy transmission with the development of e-money.
- Transmission is measured by the elasticity of the lending rate with respect to the policy rate and is higher in the post- (relative to pre-) e-money era (Box Figure 3.1).
- In countries where e-money development takes off in a context of limited financial inclusion, the elasticity of bank lending rate with respect to a change in the monetary policy rate increases by about 0.3 with the development of e-money.
- E-money and the banking sector seem to develop in tandem: e-money issuers appear to complement banks by bringing previously unbanked customers’ funds into the banking system, promoting higher financial intermediation and stronger monetary policy transmission.
- Data show that growth in e-money and growth in deposits and credit are more correlated in countries with limited initial levels of financial inclusion.
- The introduction of e-money gradually promotes financial inclusion.
- Bank lending-deposit spreads tend to decline with the development of e-money, suggesting a more competitive banking sector in the post-e-money era.

### Data and authorship
- By Z. Huang, A. Lahreche, M. Saito, and U. Wiriadinata.
- Panel data at both monthly (covering 21 countries) and annual (covering 47 countries) frequency during 2001–19 was constructed using Financial Access Survey, International Financial Statistics, and World Economic Outlook.

### CBDC and broader payment-system implications — risks and design considerations
- CBDC could improve financial stability by preserving seigniorage in the face of declining cash use, but could also make bank runs more likely by offering an alternative to bank accounts (footnote context: CRS 2023).
- Other macrofinancial risks associated with CBDC include effects on currency substitution, cross-border transactions, capital flow management, the exchange rate regime, possible monetary union membership, legal and regulatory frameworks, and oversight capacity (He and others 2023; IMF 2023f).
- Sub-Saharan African countries are particularly concerned with currency substitution, capital account volatility, and cross-border flows given risks of capital outflows and drainage of reserves (Alberola and Mattei 2022; He and others 2023).
- Ensuring CBDC interoperability and common standards with other payment rails would prevent fragmentation of payment systems; standards should cover messaging, data management, security, operational processing, opening hour requirements, and supervisory obligations.
- Potential CBDC infrastructure interoperability options include:
  - sharing functions (for example, using the same authorization and clearing providers or using the same digital identity program);
  - incorporating settlement (for example, one system settling in another);
  - completely sharing processing infrastructure and services outside the CBDC core system.
- A programmable CBDC could enhance currency conversion and prevent noneligible transactions while facilitating trade finance and supporting FX controls and capital flow management.
- CBDC could generate similar or greater impacts on deposits as mobile money, particularly mobile money backed by a central bank (footnote context).

### Preconditions, design trade-offs, and operational readiness
- Sub-Saharan African countries need to weigh implementation challenges, assess needs, and prepare adequately before CBDC issuance and use, considering:
  1. availability of resources;
  2. risk management;
  3. existing market failures, the rationale for CBDC, and alternatives available.
- CBDC is a complex technological, policy, and regulatory undertaking requiring resources for technology, infrastructure, and institutional capacity to manage a secure 24/7 interlinked system.
- An integrated risk management framework is needed across the CBDC lifecycle—from research and design to implementation and operation.
- Foundational principles to guide CBDC exploration:
  - “do no harm” to monetary and financial stability;
  - coexistence with cash and other types of money in a flexible and innovative payment ecosystem;
  - promote broader innovation and efficiency (Group of Central Banks 2020).
- CBDC core features should cover the instrument, the underlying system, and the broader institutional framework (see Group of Central Banks 2020).
- Central banks must understand benefits and incentives of different CBDC business models (Group of Central Banks 2023).
- Design choices include whether to:
  - impose limits or caps;
  - use centralized, decentralized, or combination distributed ledger technology;
  - offer account- or token-based CBDC;
  - aim to provide offline functionality;
  - charge fees or not;
  - allow nonbanks to offer CBDC wallets or not.
- Design features should not exacerbate cybersecurity, financial stability, or ML/TF risks, nor limit interoperability domestically or internationally.

### Regional collaboration and capacity considerations
- Pooling central banks’ resources to explore CBDC and ensure interoperability can be particularly beneficial in sub-Saharan Africa.
- Regional or international collaboration can facilitate development of common digital platforms and information sharing to overcome resource limitations, harmonize technology and regulation, improve regional cross-border flows, and minimize regulatory arbitrage.
- Leveraging other countries’ experiences is useful though there is no one-size-fits-all model for CBDC design and interoperability.
- Policymakers should continually upgrade legal frameworks to address governance, ML/TF concerns, financial integrity, and cybersecurity.
- International collaboration on technological, regulatory, and supervisory issues would be beneficial even if countries do not proceed with CBDC development.

### Key policy implications and recommendations
- The decision to adopt CBDC and the pace of adoption depend on country-specific circumstances, assessment of market failures or strategic rationales, and consideration of central bank resource constraints.
- CBDC can improve efficiency and financial inclusion, but several preconditions and challenges must be addressed first.
- Many motivations for CBDC, including greater financial inclusion, could often be efficiently addressed with private payment systems or other public policy interventions; countries with large infrastructure gaps, power outages, and insufficient mobile network coverage could focus on addressing those bottlenecks first.
- Priority for many sub-Saharan African countries remains payment modernization, financial efficiency, and bolstering financial inclusion by enabling private mobile money and fast payment systems, including greater operability between mobile platforms and more efficient cross-border transactions.
- In contexts where adequate fast payments and well-developed mobile operators still give rise to market failures (for example, insufficient reduction in transaction costs or reach), a well-designed CBDC might be appropriate to contribute to financial development and inclusion.
- Heavily digitized sub-Saharan African economies—in some countries, mobile money transactions exceed 50 percent of GDP (Diouf and others 2024)—could potentially benefit from “digital” cash to support monetary policy.
- For countries with limited private digital financial sectors, a widely supported and well-designed CBDC could address market failures when other public policy tools cannot.
- CBDC can streamline payment processes, reduce intermediaries, lower transaction costs, foster financial inclusion, enhance security to reduce fraud and illicit flows, and enable more timely and targeted social transfers.
- Strategic reasons for CBDC include risks of technical failures of private solutions, high cost of managing central bank physical cash, value of programmable public money, and need for central bank interaction with advanced digital markets.
- Several preconditions must be satisfied before adopting CBDC:
  - clearly identify market failures or strategic reasons and ensure objectives cannot be resolved with other policies;
  - address infrastructure constraints (power outages, mobile coverage);
  - remedy lack of national or digital identification, which complicates AML/CFT controls in the CBDC ecosystem.
- When preconditions are met, consider the CBDC–private payment systems relationship, prioritize user experience, ensure design simplicity, flexibility, and adaptability, establish sound legal and regulatory frameworks, update macroprudential policies, and manage reputational risk through communication.
- Design CBDCs to complement private payment systems and support interoperability; consider including private system providers (for example, mobile service providers) to ensure seamless transfers between CBDCs and private digital solutions, supported by regulatory safeguards and infrastructure solutions to lower interoperability costs.
- Carefully analyze and mitigate risks including data privacy, cyber insecurity, system outages, business continuity, trust and adoption risks, financial integrity, financial disintermediation, banking sector instability, and new regulatory challenges requiring international cooperation.
- Proceed cautiously given design and operational challenges, international interoperability uncertainty, fast technological developments, high costs, and limited resources; technology tests and CBDC pilots while developing capacity are appropriate next steps.
- Regional collaboration—sharing experiences, pooling resources, harmonizing regulation, collaborating on supervision, and developing common digital platforms—would be particularly beneficial in sub-Saharan Africa to promote interoperability, more efficient regional cross-border flows, trade integration, and to minimize regulatory arbitrage.

*IMF Departmental Papers — Digital Payment Innovations in Sub-Saharan Africa, Box 3. Monetary Policy Transmission (Concluded)*

### 4. Fast Payment Systems (FPS)

### 4. Fast Payment Systems (FPS)

### Definition, scope, and distinguishing features
- FPS are a financial infrastructure focused on clearing and settling payments quickly and continuously.
- FPS enable real-time or near-real-time notification and availability of funds to the payee and can operate on a 24-hour, seven-day (24/7) basis (BIS 2016).
- FPS facilitate payments through the internet, mobile phones (including feature phones without internet access), physical banks, and ATMs; they can be used for transfers and transactions between individuals, business entities, and the government.
- FPS are infrastructure and systems to transfer claims in digital format; they are not themselves an instrument or a claim (contrast with CBDCs and private mobile money).
- Differences with CBDC:
  - FPS are settlement infrastructure and rely on mobile money being created and distributed by banks (and sometimes nonbanks).
  - CBDC embeds both mobile money and settlement infrastructure and can offer features such as programmability and being a riskless form of money (Kosse and Mattei 2023).
- Clearing and settlement nuances:
  - FPS envisage immediate transfers of funds for end users, but not necessarily immediate clearing and settlement between intermediary financial institutions.
  - FPS are generally separate from central banks’ real-time gross settlement (RTGS); FPS often focus on instantaneous clearing at the transaction level while settlements among providers may or may not be instantaneous.
  - Often FPS settle through the RTGS, allowing lower liquidity requirements via netting at regular intervals. Specific FPS infrastructure focuses heavily on liquidity management arrangements—especially if non-banks are part of FPS (Patel, Kasiyanto, and Reslow 2024).
- FPS are often accompanied by a fast payment program—a set of procedures, rules, and technical standards—that facilitates payments.

### Relevance for sub-Saharan Africa: opportunities and barriers
- Opportunities:
  - FPS can significantly enhance financial inclusion if combined with efforts to improve digital infrastructure and financial education.
  - Well-designed FPS that promote competitive digital payment service providers (PSPs) can increase availability of efficient and inclusive payment services, including for the unbanked.
  - FPS could complement CBDC; a retail CBDC could offer instantaneous clearing and settlement and spur further innovation.
- Key barriers in sub-Saharan Africa:
  - Uneven mobile penetration.
  - Limited digital connectivity.
  - Low financial literacy among a considerable portion of the population.
- Outlook:
  - Obstacles are likely to soften over time as public and private initiatives enhance digital infrastructure and financial education and as financial inclusion deepens.

### Role of central banks and governance models
- Central bank roles vary by country and depend on national priorities, technical capacity, and human resources.
- Possible central bank roles:
  - Catalyst: central bank promotes FPS by creating needed infrastructure, coordinating stakeholders, or setting strategy/road map.
  - Overseer: central bank develops regulation for safe operation of FPS and monitors operators.
  - Operator: central bank operates, manages, and owns the FPS (example given: Brazil PIX).
  - Mixed arrangements exist where central banks provide real-time settlement or participate in governance without running the FPS themselves (examples include Australia, Norway, Thailand, United Kingdom).
- Design choices (public, private, mixed) influence competition, innovation, coordination, security, and accessibility.

### Regional design, access, and usage patterns (IMF survey findings)
- Access and management:
  - FPS can be accessed through mobile phones or internet connections in more than 80 percent of the countries in sub-Saharan Africa.
  - In over 70 percent of responding countries, access to the FPS would require a national ID.
  - FPS are maintained and managed by the private sector in two-thirds of sub-Saharan African countries.
  - FPS are regulated by central banks in most jurisdictions.
- Fees and cross-border arrangements:
  - FPS fees are generally low, especially for small transactions, often because of policy choices implemented through regulation or public operation, but they are not negligible.
  - Several sub-Saharan African countries have reported bilateral or multilateral arrangements with other countries or regional communities for cross-border transactions.
- Adoption and variability:
  - The majority of countries in sub-Saharan Africa already have domestic FPS in place or are actively designing them to promote fast progress toward financial inclusion, but success in adoption and usage varies greatly.

### Case example: PesaLink (Kenya)
- Objective: launched in 2017 to provide real-time P2P payments, reduce payment cycle from two days (Electronic Fund Transfer) to instant payment, and digitize the payment landscape.
- Participation and channels:
  - Banks and microfinance banks associated with the Kenya Bankers Association (KBA) can become direct participants.
  - Payment Service Aggregators (PSA) can participate indirectly through a sponsor bank for settlement.
  - Supports multiple channels: branch, mobile, internet banking, USSD-based payments, and agent networks; mobile numbers used as an alias.
- Settlement mechanism:
  - Transactions are settled through a deferred net settlement mechanism at the RTGS system of the Central Bank of Kenya.
- Growth metric:
  - From inception in 2017 to 2020, PesaLink registered a compounded annual growth rate of about 36 percent in both transaction volume and value of transactions (World Bank 2021b).

*dpdpiea - 4. Fast Payment Systems (FPS)*

### Box 4. M-PESA—Mobile Money Pioneer in Africa

### Box 4. M-PESA—Mobile Money Pioneer in Africa

### Overview
- Launched in Kenya in 2007.
- Available in seven countries: Democratic Republic of Congo (DRC), Egypt, Ghana, Kenya, Lesotho, Mozambique, and Tanzania.
- Over 50 million active users.
- Processes over 1 billion transactions per month.
- Conduit for over US$1.5 billion in remittances.
- Accounts for 60 percent of formal remittances into Kenya and 20 percent into Tanzania every year according to Vodafone.
- Recently launched a global virtual VISA card that allows users to pay for goods at international online sites; it can provide access to as many as 100 million foreign merchants including Amazon and Alibaba through mobile phones, without the need for credit cards or formal accounts with processors such as PayPal.

### Impact on financial inclusion and poverty reduction
- Household access to formal financial services increased over threefold between 2006 and 2019 in Kenya, much of which can be attributed to M-PESA (CBK 2019).
- Suri and Jack (2016) find that mobile money access in Kenya increased per capita consumption and lifted 2 percent of Kenyan households (HHs) out of poverty.
- Stronger effects for woman-headed HHs: increased financial resilience, higher savings, better labor market outcomes, and improved occupational choices (movement out of agriculture into business).
- In Kenya, only 40 percent of adults had bank accounts, compared with 79 percent having mobile money accounts (CBK 2022).

### Use for welfare delivery and private-sector services
- Useful conduit for targeted welfare support because of widespread use among low-income HHs.
- Government of Kenya national payment program provides US$20 per month to people aged seventy years and above (CBK 2022).
- World Food Program used M-PESA to disburse support and ensured voucher redemption only at specific merchants through M-PESA’s closed-loop system (M-Pesa 2024).

### Operational model and network effects
- Over 600,000 active agents across countries where the network is present, especially in areas lacking banks or ATMs.
- Agents provide cash-in and cash-out services, including for remittances from abroad, often available beyond regular banking hours.
- Person-to-person transfers can happen in real time.
- McKinsey attributes success to matching network growth to customer-based growth, ensuring a steady number of transactions per agent per month (Cobert, Helms, and Parker 2012).
- Other contributing factors: first mover advantage in Kenya, supportive regulatory framework, and a significant network effect given large market share in Kenya.

### Policy implications and considerations for CBDC and payment-system design
- Given success of M-PESA and other private digital payment providers in promoting financial inclusion, the introduction of a CBDC needs careful consideration.
- Central Bank of Kenya discussion paper (May 2022) notes that benefits related to CBDC in terms of promoting financial inclusion are limited, but there may be benefits related to cost reduction, interoperability, and enhancing cross-border payments.
- Key takeaway for policymakers: any public digital payment initiative should account for existing private-provider networks, agent infrastructure, interoperability needs, and potential limited incremental inclusion gains relative to private solutions.

*Source: Box 4. M-PESA—Mobile Money Pioneer in Africa*

### Box 5. Mauritius’ RuPay and Unified Payments Interface with India

### Box 5. Mauritius’ RuPay and Unified Payments Interface with India

### Overview and timeline
- In February 2024, Mauritius and India launched the RuPay and Unified Payments Interface (UPI) linkage between the two countries.
- RuPay was originally launched in 2012 by the National Payments Corporation of India.
- UPI was launched in 2016 as India’s fast payments system.

### Technical linkage and capabilities
- Mauritius became the first country in Africa to issue cards using RuPay technology, enabling connectivity of its payments system MauCAS to India’s UPI (February 2024).
- UPI enables money transfers through mobile devices, links multiple bank accounts into a single digital application, and accommodates third-party payment applications such as Amazon Pay, Google Pay, and Samsung Pay.
- The linkage enables:
  - An Indian tourist in Mauritius to pay a local merchant using India’s UPI.
  - A Mauritian tourist to pay in India using the Instant Payment System (IPS) app of Mauritius.
- Mauritian banks’ ability to issue India’s RuPay cards domestically could expand the supply of retail payment cards in Mauritius.

### Expected economic and payment system impacts
- The RuPay–UPI–MauCAS linkage is expected to strengthen bilateral trade and tourism by enabling smooth, cost-effective, and secure payments in both countries.
- Bilateral trade, notably Mauritius’ imports from India, revived in the first quarter of 2024 (see Box Figure 5.1 in source).
- The linkage could contribute to further expanding retail payment card availability in Mauritius.
- Mauritius experienced a steep expansion in the number of debit cards after the pandemic, along with a similar surge in transactions processed through the country’s automated clearing and settlement system (see Box Figure 5.2 in source).

### Central bank cooperation and implementation support
- Central bank cooperation on interoperability and technology was a key factor in expanding RuPay and UPI linkage in Mauritius and other countries.
- The Bank of Mauritius (BOM) and the Reserve Bank of India worked closely to ensure implementation of the new payment network.
- The BOM received technical support from the National Payments Corporation of India.

### UPI scale and international adoption (key statistics)
- By December 2024, in India alone, UPI included nearly 17 billion transactions per month, connecting 641 banks.
- Other countries that have adopted RuPay and UPI include the United Arab Emirates, Singapore, Sri Lanka, Maldives, Bhutan, and Nepal.
- Factors driving UPI’s fast expansion include the ease of development of applications, a technology-agnostic architecture allowing transactions across multiple third-party applications, user-friendly interfaces, low or zero transaction costs for end users, collaboration with the private sector, and strict regulations on data storage and use (Cornelli and others 2024).

### Key findings and implications
- The RuPay–UPI linkage can lower cross-border payment frictions between Mauritius and India, supporting trade and tourism.
- Central bank collaboration and technical assistance were instrumental in achieving interoperability and implementation.
- Widespread adoption of UPI-type systems hinges on technology design (e.g., app development ease, technology-agnostic architecture), low costs for end users, private sector collaboration, and robust data regulations.

*Source: Box 5. Mauritius’ RuPay and Unified Payments Interface with India (excerpt).*

### 5. Private Mobile Money in Sub-Saharan Africa

### 5. Private Mobile Money in Sub-Saharan Africa

### Overview and roles
- Private mobile money is a major force reshaping the payment landscape in sub-Saharan Africa.
- Cash still accounts for a large share of payment transactions, but electronic money issued by private telecom companies has been growing in importance.
- Potential benefits of private mobile money: reduce costs, improve efficiency, enhance financial inclusion, facilitate remittances, and act as a conduit for targeted transfers to poor individuals.
- Governments can promote digital development, stimulate competition, and minimize risks by offering an enabling regulatory environment that ensures deposits are sufficiently secure and the system is robust to operational risks.
- There is significant scope to further integrate mobile money with the wider financial system.

### Adoption and usage patterns
- Mobile money innovations dominate fintech in sub-Saharan Africa; the region is the most reliant on this technology worldwide.
- Mobile money account penetration in surveyed sub-Saharan African countries increased by over 200 percent between 2015 and 2021.
- In 2021, transactions occurring through mobile money amounted to nearly 45 percent of GDP in sub-Saharan Africa, compared with just 18 percent of GDP in the rest of the world.
- Most mobile money transactions are related to sending and receiving international remittances.
- Based on data for 16 sub-Saharan African countries with both mobile money and traditional bank account data:
  - In 2021, mobile money accounts were, on average, nearly twice as many as traditional deposit accounts.
  - Mobile money accounts surpassed traditional deposit accounts in 10 of the 16 reporting economies, including South Africa, Kenya, and Tanzania.
- Regional patterns:
  - East Africa leads in adoption and usage rates, with rapid progress elsewhere.
  - Of adults in sub-Saharan Africa, 33 percent have a mobile money account.
  - Of account holders, 43 percent use mobile payments for purposes such as person-to-person (domestic remittances), person-to-merchant, government-to-person (wages, transfers, and pensions), person-to-government (utilities), or payments for private sector wages and agricultural products.
  - In contrast, mobile payment usage reaches 70 percent in Europe and Asia.

### Major private mobile money providers and products
- M-Pesa (Kenya and Tanzania)
  - Launched by Safaricom in Kenya in 2007.
  - Allows users to transfer money, pay bills, access microloans and savings products.
  - Expanded to Tanzania and other countries; M-Pesa is the mobile money pioneer in East Africa, launched in 2007 and available in seven countries.
- MTN Mobile Money (Ghana, Uganda, and West Africa)
  - Launched in 2009 in Ghana by MTN Group.
  - Services: money transfers, bill payments, purchasing goods, savings and loan products, international remittances.
- Orange Money (West and Central Africa)
  - Provided by Orange Group; active in countries such as Côte d’Ivoire, Senegal, and Mali.
  - Services: send/receive money, pay for goods and services, microloans, savings, cross-border payments.
- Airtel Money (East Africa and West Africa)
  - Offered by Airtel Africa in countries including Uganda, Zambia, and Tanzania.
  - Services: money transfers, bill payments, airtime purchases, savings and loans.
- EcoCash (Zimbabwe)
  - Launched by Econet Wireless in Zimbabwe in 2011.
  - Services: money transfers, bill payments, savings; important where cash is scarce and local currency is volatile.
- Tigo Cash (Ghana and Tanzania)
  - Provided by Tigo; services include remittances, bill payments, and other financial transactions.
- GloCash (Nigeria)
  - Offered by Globacom; provides money transfers, bill payments, and airtime purchases.

### Impact on financial inclusion, resilience, and development
- Mobile money has accelerated financial inclusion and development by making transfers and payments cheaper and easier, enabling deposits and borrowing via mobile phones.
- Mobile payments have improved households’ ability to manage shocks and enabled businesses to better coordinate and connect to the broader financial system.
- During COVID-19, mobile payments increased significantly worldwide; in sub-Saharan Africa mobile money was leveraged to improve social safety net programs.
  - Example: Novissi in Togo distributed more than US$22 million through mobile payments to 600,000 urban citizens during the health crisis. The program used satellite imagery, mobile data, and AI to estimate individual wealth for rural targeting.

### Integration with banks, ecosystems, and fintech funding
- Complementarity exists between mobile network operators (MNOs), mobile money service providers, and commercial banks.
  - Mobile money operators rely on banks for management of the “float” (balance of e-money, physical cash, or bank account funds accessible to agents to meet customer demand).
  - Partnerships: Orange partnered with bancassurance company NSIA to open Orange Bank Africa in Côte d’Ivoire; Wave customers in Senegal can use prepaid credit cards by UBA Bank.
- The extent of horizontal and vertical integration seen in some Asian economies (for example, China) has not yet taken place in sub-Saharan Africa.
  - In China, big data and technologies (AI, cloud computing) enabled fintech institutions to expand horizontally (payment to lending) and vertically (ecosystems integrating e-commerce, logistics, health care, entertainment).
- Fintech funding in Africa (selected points):
  - The fintech sector raised about 53 percent (US$2.3 billion) of total funding raised by startups in 2021, up from 49 and 43 percent in 2020 and 2019, respectively.
  - Estimated revenues from the fintech sector in Africa amounted to US$4 to US$6 billion in 2020.
  - Figure 9 indicates fintech deal amounts and shares for 2019–2021 (labels shown: Fintech >$570m - 43%; Fintech >$830m - 49%; Fintech $2.3bn - 53%).

### Regulation, risks, and supervisory considerations
- Fintech regulation in sub-Saharan Africa is fragmented and implemented through sector-specific legislation.
- According to the GSMA Mobile Money Index, cross-sectoral regulatory frameworks in sub-Saharan Africa are uneven.
  - Countries have made strides in authorization, transaction limits, and agent networks.
  - Many countries lag in investment, infrastructure, consumer protection, and customer due diligence (CDD) rules.
  - Constraints include limited resources, capacity constraints, an unfavorable business climate, and lack of unique identifiers or social security numbers to prevent fraud and identity theft.
- GSMA sectoral regulatory scores cited:
  - Transaction limits: average score of 96.9 out of 100.
  - CDD rules (as proxied by KYC): average score of 53.5.
- Regulatory priorities to increase digital payments adoption: address challenges in CDD rules and consumer protection, and improve infrastructure and the investment environment.
- Lending by mobile money/e-money issuers:
  - Firms involved in mobile money often engage in lending activities; this can expose client funds to credit, maturity transformation, and leverage risks.
  - If e-money issuers engage in lending, careful supervision is needed to ensure customer funds are segregated, secured, and adequately backed.
  - Such firms should be regulated as other lending institutions and be subject to proportionate prudential regulatory requirements.
  - IMF (2021a) provides guidance on prudential supervision and oversight frameworks for e-money providers.

### Key statistics and exact figures from the chapter
- Mobile money account penetration increase: over 200 percent between 2015 and 2021 in surveyed countries.
- Mobile money transactions in 2021: nearly 45 percent of GDP in sub-Saharan Africa; 18 percent of GDP in the rest of the world.
- Mobile money accounts vs traditional deposit accounts (16 countries, 2021): mobile money accounts were, on average, nearly twice as many as traditional deposit accounts.
- Number of reporting economies where mobile money accounts surpassed traditional deposit accounts: 10 of the 16 reporting economies.
- East Africa: leads in adoption and usage rates.
- Share of adults in sub-Saharan Africa with a mobile money account: 33 percent.
- Share of mobile money account holders in sub-Saharan Africa who use mobile payments for a range of purposes: 43 percent.
- Mobile payment usage in Europe and Asia: 70 percent.
- GSMA sectoral regulatory score — Transaction limits: 96.9 out of 100.
- GSMA sectoral regulatory score — CDD (KYC): 53.5.
- Novissi cash transfer in Togo: more than US$22 million distributed to 600,000 citizens.
- Fintech sector funding share in Africa: 53 percent (US$2.3 billion) in 2021; 49 percent in 2020; 43 percent in 2019.
- Estimated fintech sector revenues in Africa in 2020: US$4 to US$6 billion.
- M-Pesa: launched in 2007 and available in seven countries.
- MTN Mobile Money: launched in 2009 in Ghana.
- EcoCash: launched in 2011.

*Source: dpdpiea - 5. Private Mobile Money in Sub-Saharan Africa*

### 2. Digital Payments (P2P, G2P, P2G, P2M, and

### 2. Digital Payments (P2P, G2P, P2G, P2M, and others) Adoption through a Mobile Phone

### Mobile money adoption and measurement
- Sources: The global Findex (World Bank, 2021a) database and IMF staff’s calculation.
- Visualization notes:
  - The left figure shows mobile money account ownership among adults (extensive margin).
  - The right figure shows digital payments adoption conditional on having a mobile money account (intensive margin).
- GSMA (2021) data are used for cross-sectoral mobile money regulatory scoring in Sub-Saharan Africa (Figure 11).
  - Data labels in the figure use International Organization for Standardization (ISO) country codes.

### Key challenges in the mobile money landscape
- Potential uncompetitive behavior by entrenched firms can undermine overall system efficiency.
- Dominant mobile money providers can resist efforts to promote interoperability to preserve competitive edge.
- Several countries in sub-Saharan Africa have achieved significant mobile money adoption with limited interoperability.
- Mobile network operators (MNO) can limit access to their network or apply discriminatory pricing for mobile money operators to use their network; such actions have occasionally led to sanctions and fines (ITU 2017).
- As mobile money expands, policymakers need to be prepared to manage potential unanticipated effects on monetary policy transmission:
  - Emerging evidence suggests that in countries with a relatively low level of financial inclusion, once mobile money sufficiently penetrates the economy, there is a higher pass-through from the monetary policy rate to retail lending rates, as mobile money balances are more sensitive to monetary policy instruments (Huang and others 2024).
  - Other studies (Erel and others 2023) document that deposits tend to shift from traditional to online banks during monetary policy tightening cycles, suggesting that understanding of the interplay between mobile money and monetary policy is incomplete.

### Systemic and regulatory implications
- When sub-Saharan African countries support private sector mobile money solutions while ensuring competition, they can advance public policy objectives: enhance financial inclusion, facilitate remittances, and provide targeted transfers to poor individuals.
- Policymakers should assess market failures requiring public intervention (including in relation to CBDC, publicly developed FPS, and possibly other policies).
- Enabling regulatory environments can promote digital development, stimulate competition, minimize risks for users, and ensure deposits are secure and the system is robust to operational risks.
- If mobile money becomes systematically important:
  - The regulatory capacity and expertise of the central bank to supervise this sector will need to be scaled up appropriately.
  - Competition authorities need to adapt their analytical tools to the uniqueness of digital markets, which may require legislative changes and adapted processes to match the speed of evolution in mobile payment services and ensure potentially anticompetitive conduct is scrutinized.

### Key Policy Implications
- Government regulations should aim to promote the development of mobile money, by stimulating competition, portability, and innovation in this sector, while minimizing risks for users—ensuring that their deposits are sufficiently secure, and that the system remains robust to operational risks.
- Mobile payments are an excellent solution to enhance efficiency and financial inclusion, together with fast payments. However, the payment system needs to be simple enough to reach all populations, including those without a smartphone or internet connection or those with limited financial education.
- Mobile money can help reduce informality by widening financial access. Lower informality and the ability to pay taxes through mobile phones can potentially lead to greater tax collection when supported by adequate public financial management and legal frameworks.
- Access to USSD is becoming increasingly essential for providing advanced Digital Financial Services (DFS) and other offerings to people with limited access to technology. Data is generally only effective on smartphones and most e-money services that are not accessed through smartphones use USSD, which presents an interactive menu on the mobile device.
- Regulation needs to be supportive of firms entering and operating in a competitive environment while ensuring interoperability across different mobile money providers and portability of users across operators. This would limit the possible dominance of a few firms, hence supporting competition, efficiency, and fairness, while promoting an environment conducive to innovation and financial stability.
- It is essential to ensure that mobile money deposits are adequately backed and protected, particularly in the absence of deposit insurance plans for mobile money users (or lack of capacity to implement such plans). Initially, and at least until the system is developed and other safeguards can be established, mobile money operators can be required to place their customers’ deposits mainly in safe assets:
  - Placing them in bank accounts would reduce concerns of bank disintermediation while leveraging existing oversight mechanisms for the protection of customers.
  - Placing them in government assets would deepen the domestic financial market for sovereign assets.
  - Providers could consider relying on central bank reserves to back their funds to ensure safety for user funds, though this may entail additional oversight requirements which may affect their business model (IMF 2021a).
  - A potentially systemic mobile money system would also call for the strengthening of supervision and arrangements for user protection.
- Whereas lending by electronic money issuers (EMIs) is generally not desirable (IMF 2021a), to the extent that they provide such additional financial digital services (like lending), it is essential that they are regulated in line with the corresponding traditional service, that is, as other lending institutions.
- The use of mobile money to provide targeted transfers such as the successful practice during the COVID-19 pandemic could be further enhanced in the region.
- Alvarez and others (2023) find that digital payment systems exhibit strategic complementarity, meaning the value of the technology increases with the number of users. However, the benefits of using the digital payment system might diminish in the presence of too many service providers or different payment apps that subject users to obstacles to interoperability or high transaction costs when interacting across platforms.

*IMF DEPARTMENTAL PAPERS  •  Digital Payment Innovations in Sub-Saharan Africa (excerpt).*

### 6. Crypto Assets in Sub-Saharan Africa

### Overview and drivers of crypto use
- Sub-Saharan Africa is an active and growing market for crypto assets.
- Blockchain technology can support fast financial transactions and innovations such as smart contract enforcement, tokenization of assets, fractionalization, and decentralized finance.
- Currency volatility, high inflation, and general macroeconomic instability and uncertainty create significant incentives to use crypto assets in sub-Saharan Africa to hedge against these risks.
- Unlike mobile money or Central Bank Digital Currencies (CBDCs), crypto assets can be held as investment products or stores of value as they are typically not pegged against the local currency.
- Prospects of high returns on crypto assets, relative to local assets or currency, can increase their attractiveness, particularly because of relatively weaker monetary policy frameworks in parts of the region.
- Stablecoins, which are fully backed and pegged into stable currencies, can be attractive instruments for those trying to avoid the volatility of instruments such as Bitcoin or Ether.

### Risks and policy concerns
- In the absence of proper regulatory oversight, crypto assets can pose significant additional risks for users and policymakers, including:
  - Excess valuation volatility.
  - Circumvention of capital flow restrictions.
  - Compromised financial stability.
  - Weakened tax collection.
- Cryptoization, or crypto dollarization—the phenomenon of substituting domestic currency for crypto—can threaten monetary sovereignty.
- Fully-backed stablecoins would present more limited consumer and financial stability risks, but stablecoins are not risk-free (for example, collapse of TerraUSD).
- In most sub-Saharan African countries, at present, regulatory frameworks for crypto assets are either weak or missing.
- In the long term, comprehensive regulatory frameworks are essential to manage risks from crypto, and where such risks are pressing, regulators could consider targeted restrictions on crypto assets or activities.
- Crypto assets should not be adopted as official currency or legal tender.

### Patterns of adoption and activity
- Although crypto asset use remains low compared with other regions, significant trade in crypto assets and development of local exchanges with some crypto-mining activities are happening in several countries (Kenya, Ghana, Mauritius, Nigeria, Seychelles, and South Africa).
- In a few countries, local businesses have started to accept crypto assets as forms of payment (Kenya, South Africa; BBC 2019; Reuters 2022b).
- Crypto adoption is positively related to macroeconomic instability: sub-Saharan African countries that stand out in crypto adoption are those with high fiscal imbalances and exchange rate volatility (Chainalysis 2023).
- Broad uptake of crypto is limited or concentrated in niche groups, with most trading occurring peer to peer without the involvement of a central authority or a cryptocurrency exchange (Chainalysis 2022).

### Crypto-asset flows (March 2022–23)
- Timeframe: March 2022–23.
- Panel “1” identifies top 20 countries with highest crypto-asset inflows (listed in order presented):
  - South Africa
  - Nigeria
  - Ghana
  - Kenya
  - Mauritius
  - Ethiopia
  - Côte d'Ivoire
  - Angola
  - Seychelles
  - Tanzania
  - Zimbabwe
  - Senegal
  - Mozambique
  - Benin
  - Cameroon
  - Madagascar
  - Uganda
  - Zambia
  - Rwanda
  - Namibia
- Panel “2” shows crypto-asset total flows (Millions of US dollars) over Mar-2022 to Mar-23, with series for Inflows, Outflows, and Net Inflows(+)/Outflows(—) (RHS).
- Sources: Chainanalysis 2023 and IMF staff calculations.
- Note: Nominal GDP is the value for year 2022 from the January-2023 World Economic Outlook.

*IMF DEPARTMENTAL PAPERS  •  Digital Payment Innovations in Sub-Saharan Africa (excerpt).*

### 2. Crypto Adoption Is Related to Macroeconomic

### 2. Crypto Adoption Is Related to Macroeconomic Instability, such as High Fiscal Imbalances and Exchange Rate Volatility

### Relationship between crypto adoption and macroeconomic instability
- Crypto adoption is larger when fiscal imbalances are high.
- Crypto adoption is larger with greater exchange rate volatility.
- Chart sources: Chainanalysis 2023 and IMF staff calculations.

### Technological features and potential benefits
- Underlying blockchain technology can support fast financial transactions and enforce smart contracts.
- Blockchain enables tokenization (assets represented as digital tokens) and fractionalization (dividing assets into smaller transferable units), widening investment opportunities and liquidity in asset markets.
- Example potential impact: Low-income households (HHs) in sub-Saharan Africa could own portions of assets (land, homes) through tokenization and fractionalization, supporting savings, wealth creation, and financial resilience.
- Decentralized finance (DeFi) possibilities: blockchain and distributed ledgers can support lending and investing without centralized intermediaries.
- Market projection: McKinsey projects the market capitalization of tokenized assets to reach $2 trillion by 2030 (McKinsey and Company 2024).46

### Risks associated with crypto assets
- Volatility and user vulnerability:
  - Crypto assets subject users to excess volatility and income loss.
  - Digital, financial, and technological knowledge gaps in sub-Saharan Africa increase susceptibility to operational risks, fraud, and scams (example: FTX’s recruitment in Africa prior to its downfall, Wexler 2023).
  - High correlation of crypto assets with traditional financial assets may increase contagion risks.
  - Price swings can compress consumer expenditure and introduce shocks to monetary policy and growth.
- Stablecoins distinction:
  - Well-regulated fully-backed stablecoins (issuer places 100 percent of received purchase revenues in safe assets) largely reduce valuation risk for the user; instability cases to date are linked to stablecoins not 100 percent backed.
- Use to circumvent capital controls and AML/CFT concerns:
  - Decentralized and anonymous features make circumvention of capital flow restrictions easier in countries with FX shortages and administrative FX controls (IMF 2023h).
  - Pseudonymity can be exploited for illegal activities and to flout AML/CFT regulations.
- Financial stability and banking sector risks:
  - Balance sheet exposure (direct holdings or indirect lending to crypto-related businesses) can leave banks vulnerable.
  - Sharp swings in crypto prices can adversely affect institutional and retail investors’ balance sheets.
  - In high inflation or financial turmoil, crypto may become more attractive than bank deposits, disrupting banking systems—particularly if financial institutions are interconnected.
  - Current exposure of banks in the region is low but could increase rapidly.
- Fiscal risks and tax erosion:
  - Pseudonymous transactions can facilitate tax avoidance and offshore tax evasion if crypto activities fall outside tax authority scope.
  - Use of unregulated crypto exchanges can undermine efforts to address offshore tax evasion.
- Remittances:
  - Crypto can lower transfer costs and is accessible via mobile phones, but success has been limited due to internet reliance and local currency conversion difficulties in less developed areas (unlike mobile money).
  - Fully backed stablecoins could present lower risks and better opportunities for remittances, contingent on adequate CDD and AML/CFT checks at entry and exit points.47

### Regulatory environment in sub-Saharan Africa
- Most central banks in sub-Saharan Africa report underdeveloped regulatory frameworks for crypto assets (see Ricci and others 2024).
- Weak supervisory capacity and the decentralized nature of crypto make regulation more difficult than for mobile money or CBDCs.
- Adopting crypto as legal tender (example: Central African Republic’s brief 2022 adoption of Bitcoin alongside CFA franc, later amended) can pose significant macroeconomic risks, including translation of crypto volatility into public finances and incompatibility with monetary union commitments.48

### Policy recommendations and key regulatory measures
- Core recommendation: Crypto assets should not be adopted as official currency or legal tender; they should be appropriately regulated.
- Objectives of a robust legal and regulatory framework:
  - Avoid excessive capital flow volatility and maintain effectiveness of capital flow measures.
  - Analyze and disclose fiscal risks and adopt unambiguous tax treatment of crypto assets.
  - Establish legal certainty and address legal risks.
  - Develop and enforce prudential, conduct, and oversight requirements for all crypto market actors, including local exchanges.
  - Set up a joint monitoring framework across domestic agencies and authorities.
  - Establish international collaborative arrangements to enhance supervision and enforcement of crypto asset regulations (IMF 2023d).
  - Distinguish clearly between fully backed and unbacked crypto assets; fully backed present lower valuation volatility risk.
- Stablecoin-specific measures:
  - License issuance of stablecoins only if they meet regulatory requirements for adequate backing, reserve management transparency, and redemption rights.
  - Adequate backing could include deposits at a central bank, commercial banks, or investment in government assets; clear governance and sufficient operational resources to ensure liquidity and redemption in bankruptcy.
  - Enforce CDD and AML/CFT at entry and exit points of stablecoin chains.
- Interim and targeted measures where comprehensive frameworks are absent:
  - Consider targeted restrictions on crypto products or activities (crypto payments, marketing, purchase/sale through bank accounts) proportional to identified risks (capital outflows, currency substitution, ML/TF, consumer and market risks).
  - Strengthen capacity to enforce restrictions, combine restrictions with consumer warnings and effective monitoring.
- On bans:
  - Blanket bans are likely undesirable and ineffective—difficult to enforce, encourage circumvention and illicit activity, and may heighten risks when legal substitutes are absent.
  - Bans may be considered where capacity to regulate and supervise is very limited, but decisions should be informed by thorough assessments of effects, efficacy, and alternative approaches.
- Long-run approach:
  - Develop comprehensive regulatory and supervisory frameworks as the best way to manage crypto risks; recognize framework development may require new legislation and time.49 50
- Alternative strategy:
  - Speed up creation and implementation of other digital solutions (CBDC, FPS, mobile money) to contain crypto adoption and avoid “crypto dollarization”; strengthen monetary policy frameworks and promote macroeconomic stability to safeguard monetary sovereignty.

### Key statistics, notes, and sources
- McKinsey projects market capitalization of tokenized assets to reach $2 trillion by 2030 (McKinsey and Company 2024).46
- Note: SSA countries listed in charts — Angola, Benin, Botswana, Burkina Faso, Cabo  Verde,  Cameroon,  Congo  DRC,  Republic  of  Cango,  Cote Divoire, Ethiopia, Gabon, Ghana, Kenya, Madagascar, Malawi,   Mali,   Mauritius,   Mozambique,   Namibia,   Nigeria,   Rwanda, Senegal, Seychelles, South Africa, Tanzania, Toqo, Uganda, Zambia, and Zimbabwe.
- Chart sources: Chainanalysis 2023 and IMF staff calculations.
- Footnotes and references appearing in source: 46, 47, 48, 49, 50; references include IMF 2023d, IMF 2023e, IMF 2023h, IMF 2022a, FSB and IMF (2024a), FSB and IMF (2024b), Ricci and others 2024, Wexler 2023, McKinsey and Company 2024, Forbes 2024.

*IMF DEPARTMENTAL PAPERS  •    Digital Payment Innovations in Sub-Saharan Africa — Chapter 2*

### 7. Policy Recommendations to Strengthen

### 7. Policy Recommendations to Strengthen the Digital Payments Ecosystem across Sub-Saharan Africa

### Key takeaways
- Sub-Saharan African countries require nuanced digital payment policies tailored to unique economic and structural characteristics: insufficient infrastructure, low financial inclusion, and high remittance costs.
- Policy priorities include expanding digital infrastructure, promoting financial and digital literacy, mitigating risks (financial integrity, AML/CFT, consumer protection, cybersecurity), supporting private sector innovation, and building central bank capacity to understand and regulate digital payment innovations.
- Public sector innovations (including CBDCs) can enhance access to central bank money and financial inclusion but should not unduly advantage public providers over private ones; CBDC implementation must be tailored to country-specific needs and conditions.
- Regional collaboration can improve cross-border payments and trade integration; digital finance can facilitate global investment and climate-related financing through AI and smart contracts.

### A. Addressing structural impediments and bottlenecks
- Expand the digital infrastructure (electricity, internet, and mobile connectivity) to ensure wider and safer connectivity, reduce disruptions, and facilitate digital payments and financial inclusion.
- Widen coverage of national and digital IDs to broaden access to digital systems and facilitate customer due diligence (CDD); phase in digital IDs for small transactions and require them for large transactions initially to avoid marginalizing fully informal operators.
- Invest in human capital to develop and expand skills in digital finance, harness the digitally savvy youth population, and generate synergies beyond direct efficiency gains from digital finance.
- Promote financial and digital literacy to advance financial inclusion, efficiency, fairness, consumer protection, and reduce consumer fraud.
- Explore offline-compatible systems until mobile and internet infrastructure is adequate, especially for remote areas or where natural disasters affect infrastructure.

### B. Mitigating specific risks
- Maintain central bank provision of cash and the obligation to accept it to avoid exacerbating financial exclusion and to ensure continuity during widespread digital outages; consider a parallel strategy utilizing CBDC to ensure affordable access to digital payment services.
- Bring crypto assets into the regulatory environment while strengthening regulatory capacity and implementing risk-based supervision, with focus on consumer protection, AML/CFT, capital flow risks, and promotion of financial education.
- Distinguish regulation between fully-backed stablecoins and unbacked crypto assets:
  - Fully-backed stablecoins: require full backing through deposits at a central bank, commercial banks, or investment in government assets; clear governance; sufficient operational resources; focus regulation on adequate backing, management transparency, and redemption rights; implement CDD and AML/CFT at entry and exit points.
  - Unbacked crypto assets: regulation should address investor protection risks such as asset price volatility and market manipulation; a general regulatory umbrella should prevent circumvention of capital controls and tax compliance.
- Address financial stability and ML/TF concerns via limits on transaction amounts, identification requirements, and CDD imposed on agents at entry and exit points into mobile money or crypto systems; consider controls based on transaction limits and frequency.
- Guard against financial disintermediation risks by carefully considering fees and amount limits associated with CBDC, mobile money, and crypto transactions.
- Be prepared to manage unanticipated effects on monetary policy transmission and bank disintermediation; evidence suggests mobile money penetration can increase pass-through from monetary policy rates to retail lending rates (Huang and others 2024) and deposits may shift to online banks during tightening cycles (Erel and others 2023).
- Reduce risks of network failures, disruptions, breaches, and rapid technological obsolescence by investing in infrastructure, promoting multiple actors/systems for resilience, and collaborating with other central banks to align with international standards.
- Manage reputation, trust, and adoption risks through adequate design, regulation, and allowing private sector solutions where possible.

### C. Supporting private sector development and innovation
- Encourage private sector leadership to support innovation and development of efficient mobile money and digital payment solutions to enhance financial inclusion, remittances, and targeted transfers to poor households (HHs).
- Create an enabling regulatory, operational, and supervisory environment to level the playing field while minimizing risks; develop comprehensive legal, regulatory, and supervisory frameworks for digital payment systems to avoid arbitrage, contain disintermediation, and stimulate fair competition.
- Ensure private and public platforms are open to all digital payment operators and promote domestic interoperability; central banks could develop interoperable digital payment platforms based on fast payment systems (FPS) or partner with private sector.
- Require electronic money institutions (EMIs) to meet statutory minimum capital requirements for licensing and ongoing operations; initial capital should be sufficient to undertake proposed activities, absorb startup losses, and cover nonproductive assets. Where EMIs do not lend, they may not need full bank regulatory requirements, but central banks often require EMIs to hold customer deposits in liquid and safe assets; consider complementary risk-based capital requirements depending on business model and systemic significance (Dobler and others 2021).
- Implement a well-governed and robust data management framework that balances privacy and financial integrity; data privacy regulations should conform to appropriate CDD and AML/CFT international standards.

### D. Exploring public sector digital payment innovations (including CBDC) as complements, not substitutes
- Avoid central banks being perceived as competing with mobile money providers and commercial banks; support FPS and competitive private solutions, and adopt CBDC only in presence of persistent market failures or strategic rationales.
- First criterion for public sector solutions: presence of persistent market failures of private digital systems; address technical obstacles (e.g., infrastructure) before resorting to CBDC; consider subsidizing access to underserved populations as an alternative.
- Public digital solutions (FPS or CBDC) may discipline private providers, contain excessive market power, reduce costs of managing physical cash, support business continuity, and offer programmability of public money; wholesale CBDC can interact more efficiently with tokenized markets.
- CBDC and FPS can complement each other; a well-functioning FPS available to nonbanks and backed by central bank reserves can closely replicate CBDC and may be more efficient to provide given current standards and resource constraints.
- Develop central bank capacity to manage and understand digital payment innovations through peer learning and technology tests/pilots; analyze costs and benefits of user fee structures for CBDC transactions relative to mobile money and implications of CBDC interest on bank disintermediation and monetary policy (see Koonprasert and others 2024).
- Even without immediate CBDC plans, central banks should be prepared to act promptly if circumstances change; consider regional collaboration for pilots and weigh high CBDC development costs, uncertainty in international interoperability, and rapid technological change; consult broadly with stakeholders before implementing CBDC.
- CBDC suitability will vary across countries depending on central bank capacity, effectiveness of existing systems, identified market failures, competing public priorities, and macroeconomic stability; CBDCs need to be accompanied by sound macroeconomic policies and may be introduced during periods of macroeconomic stability.
- The CBDC business case may increase over time as digitalization deepens locally, regionally, and globally; once international interoperability is a key issue, coordinated CBDC issuance may help.
- Governments can use public digital innovations to promote private digital payments and broaden acceptance (India cited as an example of world-class digital infrastructure, interoperability standards, and open-source software facilitating transition to digital social assistance programs).

### E. Leveraging digitalization in public finance
- Use mobile money, FPS, or CBDC for public transfers and tax payments to address informality and improve targeting of vulnerable people; leveraging digital payments for public expenditure can widen digital networks and reduce informality while improving fiscal transparency (Guinea-Bissau example using blockchain for wage bill management cited).
- Develop fractionalized digital lending for the public sector to allow individuals with limited income to access savings tools in smaller increments; reduce denominations of government bonds and allow purchases with e-money or CBDC to create new savings opportunities for lower-income populations.
- Expand fractionalized access to digital finance instruments and evaluate integration with digital credit and digital investment vehicles; ensure appropriate regulation and supervision to avoid regulatory arbitrage and protect consumers.
- Carefully balance anonymity versus efficiency and fairness of information sharing in new digital finance instruments.

### F. Synergies with capital flows, climate financing, and AI
- Digital finance can catalyze broader financing opportunities beyond payments, including fractionalization of public borrowing and cheaper remittances, making it easier for global investors to assess and buy local assets (e.g., diaspora bonds).
- Technologies such as blockchain, distributed ledgers, and smart contracts, combined with large datasets, can improve collateral identification and risk assessment, promoting private sector access to domestic credit and international capital markets.
- AI can facilitate collection and validation of information for smart contracts and climate-related financing by improving pricing and determination of contingencies, processing large datasets for risk assessments and credit scoring, and enabling customized insurance solutions for agriculture and climate variability.
- AI-based models can analyze payment histories and usage patterns to generate credit scores for those lacking formal credit histories (such as many farmers), potentially expanding credit access.
- Authorities have expressed concerns about data privacy, lack of information, and potentially abusive user terms in AI and data-driven financial solutions (Argentina, Hong Kong, Kenya, Portugal, and Spain noted).

*Source: dpdpiea - 7. Policy Recommendations to Strengthen*

### Box 7. Harnessing Payments and Fintech Innovations for Climate Change in

### Box 7. Harnessing Payments and Fintech Innovations for Climate Change in Sub-Saharan Africa

### Link between payment system innovations, fintech, and climate objectives
- Payment system innovations are linked to the broader financial technology (fintech) progress seen in Sub-Saharan Africa (sub-Saharan Africa) over the past two decades.
- These innovations have served as starting points for using other technologies (such as artificial intelligence (AI)) to reach various policy or development objectives including for climate change.
- In sub-Saharan Africa, where data can often be scarce, fintech companies use digital platforms to collect large data sets from their operations.
- Using AI to leverage data from fintech companies and other sources, new companies provide risk assessment and credit scoring including for climate and agricultural ventures.

### Impacts in the agriculture sector
- Accurate risk assessments enable the crafting of more tailored insurance policies, protecting farmers against unpredictable climate variability.
- AI models generate credit scores for farmers, many of whom lack formal credit histories, thereby facilitating enhanced access to credit.

### Company cases illustrating fintech-to-climate applications
- M-KOPA
  - Initially launched to provide affordable solar power solutions in East Africa with a pioneering “pay-as-you-go” solar energy model, enabling customers to purchase solar systems on affordable payment plans using mobile money services.
  - Evolved into a broader fintech role, incorporating AI and machine learning to analyze extensive customer data collected from payment histories and usage patterns.
  - Analysis helps M-KOPA build detailed credit profiles, refine its credit scoring systems, and manage financial risks, allowing it to offer tailored financing options through smartphones.
  - Strategic use of technology underpins M-KOPA’s role in driving financial inclusion by extending essential services beyond solar power to a wider range of consumer products, like electric bike or solar-powered water pumps.
- PULA
  - An innovative Insurtech startup based in Kenya that leverages advanced data analytics and AI to deliver customized, cost-effective insurance solutions tailored specifically for the agricultural sector.
  - Its pioneering Weather Index Insurance uses real-time weather data to automatically trigger compensation to farmers facing adverse weather conditions, eliminating traditional claims processes and ensuring timely and accurate payouts.
  - Developed user-friendly mobile applications that simplify the insurance purchase process and provide ongoing policy updates and crucial agricultural information accessible even in the most remote areas.
  - Has expanded operations from Kenya to multiple other African countries, helping reinforce farmers’ resilience to climate variability.

### Forward-looking potential and outlook
- The potential for AI and machine learning in Africa’s fintech sector is promising.
- Although the development of AI technologies is still in its nascent stages relative to the broader advancement of digital solutions, AI could enhance the resilience of the most vulnerable to climate change.

*Box 7. Harnessing Payments and Fintech Innovations for Climate Change in Sub-Saharan Africa — By Laila Drissi Bourhanbour.*

### Annex Figure 2.1, panel 5). Higher reliance on international remittances is positively associated with a higher

### dpdpiea - Annex Figure 2.1, panel 5). Higher reliance on international remittances is positively associated with a higher

### Determinants of Crypto Asset Adoption (summary of empirical findings)
- Higher reliance on international remittances is positively associated with a higher rate of crypto asset adoption, as economic agents in those countries may turn to crypto assets to reduce transaction and transfer costs (Annex 2, Table 1, Annex Figure 2.1, panel 6).
- A stronger digital infrastructure (proxied by access to secure internet servers) allows for a faster rate of crypto asset adoption.
- Economic uncertainty appears to be a deterrent to crypto asset adoption, as evidenced by the 2022 crypto asset selloff during heightened market uncertainty and risk aversion (Annex 2, Table 1).
- Panel regression results indicate exchange rate volatility and a country’s history of inflation crises are robust determinants of crypto asset adoption, supporting the interpretation that crypto assets are used to hedge against weak sovereign fundamentals.
- Countries with greater reliance on the traditional financial system (proxied by the size of bank deposits to GDP) are less likely to turn to crypto assets.

### Annex Table 2.1 — Robust determinants (coefficients from regression of Rate of Crypto Adoption: Log of (1 + Crypto Volumes/GDP))
- Inflation (log): 1.994
- Control of corruption index (higher= more control): −1.116
- Real GDP growth: 0.294
- Remittances (% GDP): 3.025
- GDP per capita (log): 0.93
- Bank deposits to GDP: −1.281
- Unemployment rate: −0.401
- Share of population (15-24) years of total population: 0.306
- Population (log): −3.127
- Secure internet server users per million (log): 3.691
- Chinn Itoh Index (higher= liberalized capital account): −1.47
- GDP volatility (SD of log GDP): 0.308
- Uncertainty Index: −1.09
- Informal employment (% GDP): 1.139
- Urban population to total population: −0.455
- Trade openness: 0 .116
- Manufacturing VA to GDP: 0.206
- Number of historical inflation crises: −0.916
- People borrowing from a financial institution (% age 15+): 0.344
- Growth of gross government debt: 0.0836
- Exchange rate volatility: −0.449
- Constant: −0.868
- Observations: 105
- Note: t-statistics reported in the table. A regressor is considered robust if the associated t statistic is in absolute value larger than 1. In bold are regressors that can be considered “robust.”

### Visual insights from Annex Figure 2.1 (selected panels)
- Panel 5 (Bank Deposits to GDP): higher Bank Deposits to GDP are associated with lower Log of (1 + Crypto Asset Adoption).
- Panel 6 (International Remittances): higher Remittances (% GDP) are associated with higher Log of (1 + Crypto Asset Adoption).
- Other panels (Inflation; Control of Corruption; Capital Account Openness; Size of Informal Economy) visually support the tabulated regression results indicating positive associations with inflation, informality, remittances, and negative associations with control of corruption, capital account openness, and bank deposit depth.

### Policy implications and recommendations
- Strengthen regulatory frameworks for crypto assets to prevent unwanted uses and protect monetary sovereignty.
- Strengthen sovereign fundamentals (reduce inflation, exchange rate volatility) to reduce incentives for crypto asset adoption as a hedge.
- Implement improved Customer Due Diligence (CDD) and anti-money laundering/combating the financing of terrorism (AML/CFT) requirements and better tracking of crypto transaction flows to detect circumvention of capital controls.
- Broaden financial inclusion to reduce reliance on crypto assets among populations with limited access to traditional banking; however, in countries with lower financial development, crypto assets and digital currencies could help broaden financial inclusion if appropriately regulated and designed.

### Annex 3 — Digital payment innovations and remittances (key findings and statistics)
- Sub-Saharan Africa received over US$50 billion in remittances in 2022.
- The cost of sending remittances to sub-Saharan Africa was 8 percent on average in 2022, compared with the SDG 2030 target of 3 percent.
- If remittance costs were at the SDG target today (hence lower by 5 percent), low-income households in the region would receive about US$2.5 billion more per year, representing savings from lower transaction costs (taking the amount in 2022 as a benchmark).
- The cost of sending $200 in remittances to sub-Saharan Africa was nearly half the cost when sent digitally versus nondigitally (World Bank 2023a).
  - Average cost of sending $200 in cash to SSA (2022): $18.30 (foreign exchange margin $5.70).
  - Average cost of sending $200 digitally (2022): $10.32 (foreign exchange margin $3.62).
- Mobile money was the least costly way to send remittances in 2022; countries with greater prevalence of mobile money tended to have lower costs of receiving remittances (Annex Figure 3.2).
- Correlation between average percentage cost of receiving remittances and value of mobile money transactions: ρ = −0.30.
- Crypto assets for remittances have been limited so far:
  - Average cost of sending remittances through bitcoin can be as low as 2.9 percent (IMF 2023d), but additional costs (for cashing out, volatility, internet reliance, and conversion difficulties) limit practicality.
  - Stablecoins could mitigate volatility if fully-backed, but last-mile delivery challenges (limited internet, cash-in/cash-out access) remain significant.

### Central Bank Digital Currencies (CBDCs) and remittances
- CBDCs could potentially lower cross-border remittance costs, but they need to be well designed, glitch-free, and widely adopted.
- Delivery to final recipients is challenging if recipients lack a CBDC wallet; interoperability with mobile money wallets across and within countries could partly overcome this.
- Large spreads between official and parallel market exchange rates should be avoided as they may deter CBDC use for remittances.
- Cross-border CBDC flows should adhere to AML/CFT regulations and CDD requirements, which is challenging where people lack proper identification.

### Regional trade and digital payments (Annex 4, key points)
- Intra-sub-Saharan African trade accounts for only 15 percent of total regional trade, below Emerging Asia (25 percent) and Emerging Europe (22 percent).
- Limited cross-border payment processes, high tariffs, and nontariff barriers impede intra-regional trade.
- Only about 12 percent of intra-African payments are cleared within the continent (SWIFT 2018); most are routed through overseas banks, increasing costs.
- More efficient and interoperable digital payment systems, plus digitalized trade procedures, could reduce trade costs and help address the approximately US$81 billion trade financing gap for the African continent.
- Regional settlement platforms (e.g., SADC-RTGS and PAPSS) improve intra-regional settlements but are not interoperable with each other or with nonparticipating countries; governance, data management, scalability, currency of settlement, and coordination of regulatory frameworks need to be addressed.
- Key measures to enhance digitalized cross-border payments: develop interoperability between national payment infrastructures, coordinate regulatory frameworks, promote cooperation, digitalize trade procedures, and increase awareness within the business community.

*Source: Authors’ estimations, Gonzalez Dominguez, Furceri and Tawk (forthcoming), IMF Departmental Papers — Digital Payment Innovations in Sub-Saharan Africa (Annexes 2–4 excerpts).*

### Annex Table 4.1. Regional Multilateral Payment Platforms in Africa

### Annex Table 4.1. Regional Multilateral Payment Platforms in Africa

### Regional payment platforms (table entries)
- Multi-currency, hub and spoke, operated by public entity
  - East African Payment System (EAPS) — East African Community (EAC) — Wholesale
- Single currency, hub and spoke, operated by public entity
  - Regional Payment and Settlement System (REPSS) — Eastern and Southern Africa Common Market for East and Southern Africa (COMESA) — Wholesale
- Single-currency, common platform, operated by public entity
  - Southern African Development Community Real-Time Gross Settlement System (SADC-RTGS) — Southern African Development Community (SADC) — Wholesale
- Single currency, common platform, operated by the monetary authority
  - S TAR- UEMOA , R TGS — West African Economic and Monetary Union (WAEMU) — Wholesale
- Multi-currency, common platform
  - West African Monetary Zone (WAMZ) Payments System — West African Monetary Zone (WAMZ) — Wholesale
- Single currency, common platform, operated by the monetary authority
  - SYGMA-RTGS — Central African Economic and Monetary Community (CEMAC) — Wholesale
- Private initiative
  - MFS-AFRICA — Multiregional mobile money hub — Retail, mobile payments including remittances
- Multi-currency
  - BUNA — North Africa and the Arab region — Retail including remittances and wholesale
- Multi-currency, common platform
  - PAPSS — Africa — Retail including remittances

Source: BIS (2023b).
Note: South African Reserve Bank, Regional Settlement Services (SADC-RTGS) referenced.

### Potential channels through which private digital payment systems and CBDC can boost cross-border payments and regional trade
- Increase the speed of cross-border payments and settlements, provided future regulatory compliance requirements on digital currency service providers and foreign exchange (FX) controls are efficient.
- Ease trade financing, as records from digital payment systems could provide alternative credit information for SMEs, who typically do not have well-established financial records to underwrite loans for trade (especially across borders), provided strong privacy protocols are enforced.
- Alleviate the “de-risking” phenomenon in certain countries, which implies terminating or restricting business and banking correspondent relationships, by providing alternative financing and payment methods to those countries. 66
- Provide potential alternatives to the use of traditional corresponding bank relationships and dominant currencies for sub-Saharan African regional trade.
- Generate data on small-scale cross-border trade (SSCBT) and informal trade. Informal trade or SSCBT is of substantial importance in sub-Saharan Africa (World Bank 2020b). 67
- Reduce the cost of small-value transactions (which normally tend to be disproportionately higher), thus benefiting small cross-border traders.

### Key obstacles for benefiting from digitalized cross-border payments
- Weak financial infrastructure, including access points such as mobile phones.
- Lack of identification documents such as government-issued identity cards or birth certificates (often required to use digital services).
- Low financial literacy.

### Policy measures to help intra-sub-Saharan African trade benefit from digitalized cross-border payments
- Developing interoperability between domestic or regional fast payment infrastructures and arrangements, integrating retailers into the payment landscape, and connecting customers on a wider scale.
- Coordinating legal, regulatory, supervisory, and oversight frameworks across jurisdictions; ironing out regulatory discrepancies, such as between AML screening requirements for cross-border transactions.
- Promoting public–private, international cooperation and coordination of exploration of CBDC.
- Enhancing domestic connectivity infrastructure as well as the development of identification systems.
- Digitalizing trade, particularly customs procedures.

*IMF DEPARTMENTAL PAPERS • Digital Payment Innovations in Sub-Saharan Africa — Annex Table 4.1 and related text (source content provided).*

### Annex 5. The Emergence of Digital Assets, CBDC, and Informality in SSA

### Context and definitions
- Focus: channels shaping the relationship between digital payments (DPs) and informality in sub-Saharan Africa (SSA).
- Informality in SSA: pervasive, with cash transactions and limited access to formal banking; estimates put the size of the informal economy at as high as 65 percent of GDP (Medina, Jonelis, and Cangul 2017). In this annex, informality is primarily defined by tax evasion. 68

### Ambiguous net effect: simultaneous enhancement and reduction channels
- Overall statement:
  - DPs and CBDCs can simultaneously enhance informality and reduce it; short-term dominance of the enhancement channel is likely, with significant reductions in informality more plausible over a longer horizon if digitalization is embedded in broader policy strategies.

### The Enhancement Channel (how DPs/CBDC may entrench informality)
- Replication/decoupling of banking services by private-sector DPs operating without public reporting can:
  - Make the informal sector more efficient while avoiding integration into the taxation network.
  - Make traditional banking less relevant through decoupling payments from credit intermediation and by enabling alternative access to digital credit via payments history.
  - Shield informal actors from tax scrutiny by avoiding requirements to present a tax ID.
- Decentralized mobile money and blockchain-enabled platforms can enable a digitalized informal economy by allowing informal firms to use digital platforms outside formal banking and remain unregulated and anonymous. 69
- Examples:
  - During COVID-19 in Uganda, Jumia connected over 2,000 informal street vendors on its virtual platform with a new product line tailored to low-income earners.
  - In the Gambia, the digital e-commerce platform “My Lumo” was tailored to informal actors.

### The Reduction Channel (how DPs/CBDC may lower informality)
- Customers may adopt formally recorded DPs to capture efficiency gains in predominantly cash economies, initiating network externalities that extend into the informal sector.
- Initial steps where governments used mobile transfers to distribute payments have spread:
  - Senegal: payments of government salaries (at inception stage) and plans to promote universal health coverage for informal workers if they accept payments digitally from their employers; cited payroll cash management costs can account for up to 7 percent of the total payroll.
  - Namibia: mobile wallets to distribute cash transfers and digitalizing its social registry.
  - Togo: Novissi platform for social protection uses machine learning and mobile metadata for better targeting. 70 71
- Evidence: Jacolin, Massil, and Noah (2021) document that wider use can make technology and infrastructure more economically viable in the long term.
- Cross-country comparison: a study covering 60 global markets over 10 years as of 2007 (AT Kearney 2018) finds informality largely flat in Kenya and Nigeria over the period despite significant increases in mobile transactions, suggesting short-term digitalization has not yet meaningfully reduced informality.

### Reasons for slow or limited reduction of informality
- Sticky nature of informality due to behavioral dominance of cash and high entry costs to the formal economy.
- Need for network externality gains to materialize over time; segmentation of digital transactions can limit spillovers.
- Enhancement mechanism: informal actors may exploit digital features without formalizing.

### Policy implications to support formalization via DPs/CBDC
- Policies should focus on lowering entry costs into the formal economy, such as reducing tax rates for small firms, to increase adoption rates and reduce informality.
- Design choices matter: make digital public infrastructure (DPI) easy and costless for informal agents to adopt e-wallets and for informal vendors to accept digital payments (example: India’s DPI). Flexibility and interoperability are important to promote system-wide integration and aid transition to formality.
- Consider approaches to encourage CBDC uptake such as remuneration of CBDC deposits or elimination of fees involved in wire transfers (balanced against bank disintermediation risks). 72
- Policymakers might restrict some CBDC advantages (e.g., remuneration) to agents with tax IDs to foster formalization—but restriction could distort natural DP evolution. An alternative is to encourage broad adoption first, then at a later stage widen the tax base through restricting benefits or using additional tools.

### CBDC-specific considerations and risks
- CBDCs could offer advantages over third-party platforms if they facilitate cross-border payments and interoperability, potentially reducing costs of cross-border cash transactions and exchange rate convertibility in challenging regions.
- Interoperability could also raise the risk of digital dollarization (currency substitution), especially in countries with high inflation and weak monetary policy frameworks, unless safeguards such as effective CFM and financial integrity measures are in place (IMF 2020a, 2024a). Digital dollarization could erode confidence in domestic central banks and formal mechanisms, potentially entrenching the informal sector.

### Generating synergies within a broader digitalization strategy
- Integrate CBDC and DP development into a broader digitalization strategy that promotes digitalization of public services alongside payments to provide stronger incentives for informal actors to formalize.
- India’s DPI example: public incentives plus a flexible, interoperable block-based platform coupled with private sector demand supported broader transformation and evidence of tax collection increasing beyond nominal GDP growth because of digitalization.
- Complementary structural reforms and investments are required to overcome the digital divide:
  - Ensure reliable energy and access to the internet.
  - Expand digital and financial literacy across society.
- Expanded technology adoption can enhance links between informal and formal sectors and increase potential for formalization (Erumban 2024).

*IMF DEPARTMENTAL PAPERS • Digital Payment Innovations in Sub-Saharan Africa — Annex 5 (source content provided).*

### Annex 6. eNaira: Initial Stocktaking

### Annex 6. eNaira: Initial Stocktaking

### Background and objectives
- Launched: On October 25, 2021, the CBN officially launched the eNaira—Africa’s first CBDC and second fully launched in the world after The Bahamas.
- Stated aims: improve the efficiency of payment systems, broaden access to finance, boost remittances, and enhance tax collection.
- Legal framework: Nigeria did not amend its central bank law; the CBN deemed it has the power to issue a CBDC under the current CBN Act.
- Development timeline: intensive preparation dates back to 2017 (internal study, external consultation, proof of concept in a sandbox).
- Liability and users: eNaira is a direct liability of the CBN and may be owned and used by both wholesale (banks) and retail (merchants and individuals) clients.
- Operational model: retail transactions handled by financial institutions (mainly banks); CBN transacts directly only with financial institutions—retail end described as a hybrid system per BIS taxonomy.

### Technical design and operational features
- Platform: proprietary Digital Currency Management System (DCMS) developed by Bitt Inc., using Hyperledger Fabric as underlying transaction network/ledger.
- Ledger characteristics:
  - Hyperledger blockchain ledger allows all participating nodes to keep all records of CBDC transactions.
  - Block validation mechanism based on supermajority voting.
  - Distributed ledger mitigates single-point-of-failure risks via multiple geographically dispersed operators/hosts.
  - Technical limitation noted: blockchain technology can limit speed of processing and appending a block; without append the payment is not final/irrevocable. So far, eNaira system has not faced a latency problem.
- Account model: eNaira uses an account-based blockchain technology, making transactions traceable to identified individuals or businesses as needed.
- Wallets and role differentiation: DCMS provides a variety of wallets distinguished by users’ roles (for example, central bank wallets can issue and distribute CBDC to financial institutions).

### Access model and phased rollout
- Initial phase: CBN took a “phased approach”—initially granting access only to customers with bank accounts and restricting eNaira transactions to onshore uses only.
- Phase 2 (August 2022): expanded coverage to (1) people without bank accounts (but with mobile phones) and (2) those without internet access (through USSD technology).
  - People without bank accounts may open an eNaira wallet using their national ID number (NIN).
  - Load channels: cash-in services provided by the agency banking network, moving mobile money, or receiving eNaira from a third party.
- Transaction handling: all eNaira transactions are handled in real-time and recorded by a CBN system; retail-level exchanges between CBDC and cash or deposit holdings are handled by financial institutions.

### Financial integrity, AML/CFT, and limits
- AML/CFT backbone: tiered customer due diligence (CDD) system based on the prevailing AML/CFT backbone for Nigeria since 2013.
- Note of caution: existing AML/CFT regulatory framework may not be sufficient to completely address new risks stemming from CBDC.
- Traceability: account-based model makes transactions traceable.
- CBN controls and restrictions:
  - strict limits on the volume of daily transactions with eNaira that individuals and businesses can do;
  - CBN does not allow the use of eNaira for currency speculation.
- Offshore/remittance risk mitigation: maintaining transaction and/or balance limits to wallets held by offshore entities if/when eNaira is used for remittances; enforcement challenges noted (balancing data privacy with financial surveillance).

### Tiered wallet system (Annex Table 6.1)
- Tier 0 (Retail, including people without bank account)
  - Requirement to Open eNaira Wallet: Phone number
  - Identity Test: No identity information required except for phone number.
  - Ceiling: Daily transaction limit (N20,000); Balance limit (N120,000)
- Tier 1 (Retail, including people without bank account)
  - Requirement: Phone number (national ID number verified)
  - Identity Test: Basic identity information (for example, photo, name, date of birth); no evidence required; no verification required.
  - Ceiling: Daily transaction limit (N50,000); Balance limit (N300,000)
- Tier 2 (Retail, people with bank account)
  - Requirement: Bank verification number (BVN)
  - Identity Test: Basic identity information (for example, photo, name, date of birth); evidence required for submitted information; customer to be verified through official databases.
  - Ceiling: Daily transaction limit (N200,000); Balance limit (N500,000)
- Tier 3 (Retail, people with bank account)
  - Requirement: Bank verification number (BVN)
  - Identity Test: Full identity information and evidence (including proof of address and physical presence in the address) in pursuant to CBN’s AML/CFT Regulation 2009. Risk-based verification done.
  - Ceiling: Daily transaction limit (N1,000,000); Balance limit (N5,000,000)
- Merchant
  - Requirement: Existing bank account, TIN, BVN of MD/CEO, email address, business certificate
  - Identity Test: Full CDD requirement in pursuant to CBN’s AML/CFT Regulation 2009.
  - Ceiling: No limit
- Exchange rate/context note: As of end-2023, the naira’s exchange rate was 901.43 Naira/USD.

### Adoption, usage, and key impediments
- Uptake in first year: retail wallet downloads amounting to 942,000 at the end of November 2022—0.8 percent of active bank accounts.
- Transactions since inception: total number of eNaira retail transactions (about 802,000) is less than the number of eNaira wallets, indicating wallets are not actively used.
- Observed limitations:
  - limited merchant adoption and limited acceptance relative to alternatives (debit card, mobile banking apps);
  - initial access restriction (only banked customers) limited early benefits for many prospective users.
- Public promotion: a public usage promotion campaign making inroads; need for a well-designed public adoption strategy.
- Two strategic issues to address in adoption strategy:
  1. defining the right relationship with mobile money (compete vs. complement);
  2. creating an enabling environment for eNaira’s usage in remittance.

### Relationship with mobile money
- Strategic choices:
  - CBN could compete with mobile money providers by acquiring last-mile contact points and outsourcing private retail customer service providers such as PISPs—this raises economic and legal questions (central banks “picking winners” and legal purview).
  - Alternatively, CBN could maximize synergy with mobile money by providing eNaira as a safer shelter of value and a bridge for interoperability.

### Remittances, exchange rate reform, and FX risks
- Historical impediment: large gap between official and parallel market exchange rates in previous years hampered CBDC usage for remittances.
- Reform outcome: gap has largely closed since January 2024 as a result of Nigeria’s exchange rate unification in mid-2023, resulting in convergence between the two rates over time.
- Remittance channel economics: hard to keep remittances flowing through official channel if large parallel market spread persisted; alternative channels (for example, bilateral FX payment made overseas with corresponding domestic naira transfers) are more attractive when spreads persist.
- Cautions: potential eNaira impacts on dollarization and FX market volatility if eNaira is used for remittances—mitigated by transaction/balance limits, traceability, and prohibition on FX speculation.

### Crypto context and related risks
- Crypto adoption: According to Chainalysis, Nigeria has the second largest rate of crypto adoption in the world behind India (New York Times, April 18, 2024).
- Crypto dollarization drivers: currency substitution from the naira to the US dollar; inflation and exchange rate volatility have accelerated crypto dollarization.
- Crypto flows: Nigeria received $56 billion in cryptocurrencies between July 2022 and June 2023 (Chainalysis).
- Current P2P settlement method: crypto P2P exchanges in Nigeria are generally settled through transfers of naira using Nigerian domestic bank accounts.
- Regulatory response: Nigerian authorities intensified crackdowns and announced upcoming crypto regulations to entirely ban P2P crypto trading using the naira (May 7, 2024).
- Concern: cross-border nonresident access to eNaira (or naira stablecoins) could complicate regulation/monitoring of P2P crypto activity.

### Early lessons and implementation implications
- Technical feasibility: a retail CBDC program is technically feasible for countries with relatively strong central bank operational capacities (for example, cybersecurity capacity, interoperability through a national switch, internet connectivity). International organizations like the IMF are ready to help.
- Phased approach rationale: a phased approach (for example, starting with only people with bank accounts) can be sensible to allow time for testing resilience of the existing financial system (for example, AML/CFT framework) to CBDC adoption.
- Macroeconomic policy package: operationalizing CBDC’s enabling potential may require a comprehensive macroeconomic policy package. Example: Nigeria’s large parallel market spread was the biggest impediment to using CBDC for remittances. The use of CBDC for financial inclusion may also need closer link with the digitalization of the fiscal system (for example, digitalizing social cash transfers).
- Role reorientation: considerations can be given to focusing eNaira’s future role more on the wholesale CBDC side while allowing private sector players to flexibly operate in the retail side of the CBDC ecosystem as envisaged by CBN’s eNaira 2.0 project.

### Key numerical facts and statistics
- Launch date: October 25, 2021.
- Retail wallet downloads: 942,000 (end of November 2022).
- Retail wallets as share of active bank accounts: 0.8 percent of active bank accounts.
- Total eNaira retail transactions since inception: about 802,000.
- eNaira phase 2 expansion: August 2022 (coverage expanded to unbanked with phones and USSD users).
- Crypto inflows (Nigeria July 2022–June 2023): $56 billion in cryptocurrencies.
- Exchange rate (end-2023): 901.43 Naira/USD.

*Annex 6. eNaira: Initial Stocktaking, IMF departmental paper content as provided.*

### Annex 8. Digital Social Safety Net: The

### Annex 8. Digital Social Safety Net: The Case of Togo and Lessons Learned

### Overview and Program Rationale
- Launched in April 2020 in Togo, the Novissi program provides direct cash transfers to households (HHs) that have lost all or part of their income because of the effect of the coronavirus disease 2019 (COVID-19) pandemic.
- The program used digitalization and mobile banking to target vulnerable populations and delivered emergency cash transfers based on machine learning techniques.
- Given health restrictions, the government created a "contactless transfer" through a digital platform, encouraging uptake of mobile money.

### Key Features of the Novissi Program
- Beneficiary enrollment relies on national voter’s card and mobile phone registries:
  - Using voter’s cards ensures the applicant is a Togolese national and provides information on the candidate’s sector of activity to help exclude formal sector employees.
  - This combination of two databases simplifies enrollment and enhances access for the most vulnerable.
- Consumption-based targeting leverages digital footprints and machine learning:
  - Poorest villages and neighborhoods were selected through high-resolution satellite imagery and nationally representative household consumption data.
  - Within selected localities, the poorest individuals were prioritized via machine learning algorithms using mobile phone metadata and phone surveys.
  - The efficiency of such data must be balanced against adequate privacy and consumer data protection.
- Transfers through mobile money circumvent low access to financial services:
  - Togo’s bancarization rate of 26.8 percent remains low compared with many other countries, particularly emerging market.
  - Eligible applicants receive payments on electronic wallets without transaction costs that would normally apply through banks.
  - The system promotes broader reach and financial inclusion more effectively than traditional channels.

### Outcomes and Key Statistics
- By March 2021:
  - The program reached 819,972 beneficiaries.
  - Disbursed approximately US$23.9 million.
- Regional and global context cited:
  - Informal sector accounts for about 85 percent of total employment in Africa (International Labour Organization).
  - The World Bank estimates that approximately 850 million people in the world do not have an official ID, and over 90 percent of this total represents people living in lower-middle-income and low-income countries.
  - As of 2021, official ID ownership in Togo is 40.3 percent of the total population.
- Subsidy and access context:
  - Across regions, the top 20 percent of HHs capture on average seven times more benefits of energy subsidies than the bottom 20 percent.
  - Sub-Saharan African authorities spend 5.5 percent of government revenues and 1.5 percent of sub-Saharan Africa’s GDP on energy sector subsidies.
  - Electricity access: 485 kWh per habitant in sub-Saharan Africa versus 6021 kWh in advanced economies.

### Challenges and Limitations
- Data issues and targeting errors:
  - Adapting targeting and registration to reach individuals not commonly included in social assistance databases (for example, urban informal workers) can be challenging.
  - Poverty levels can change over time, making data obsolete.
  - Exclusions can occur for people who do not have mobile phones.
- Identification and verification constraints:
  - Efficient and widespread identification and verification are essential as some people have more than two phone numbers and SIM cards.
  - Access to official identification (birth certificates, national identity documents) remains low among the poorest, oldest, and most remote segments.
- Privacy and security concerns:
  - The use of mobile phone metadata and machine learning requires balancing efficiency with privacy and consumer data protection.
  - Data security is compromised when the CDD process relies on outdated technology and methods; leveraging artificial intelligence and machine learning can enable real-time document examination to enhance security and efficiency.

### Policy Lessons and Recommendations
- Leverage mobile money and mobile data for better targeting:
  - Mobile money accounts provide a means to reach beneficiaries even where traditional financial sector penetration is low.
  - Mobile network operators (MNOs) are well positioned to support outreach given their wide reach among poorest and most vulnerable populations.
- Strengthen supporting digital and regulatory infrastructure:
  - Data and digital infrastructure are critical for program success.
  - Strengthen requirements for customer due diligence (CDD), consumer protection, and agent transparency to increase trust and ease of use for mobile money.
  - Improve data security and close the digital infrastructure gap to foster mobile money adoption and create a secure digital ecosystem for scalable digital social protection.
- Implement effective beneficiary verification and enrollment tools:
  - New digital tools are required to facilitate selection, enrollment, targeted delivery, and transparent disbursement of funds.
  - Effective verification methods are essential to validate recipients throughout enrollment and disbursement.

### Potential to Replace Generalized Subsidies
- Mobile money and mobile-based identification can be used to better target subsidies:
  - Many developing countries rely on generalized subsidies that often benefit better-off sections more than the poor.
  - The Novissi mechanism could inform replacing generalized subsidies and social safety systems with better-targeted transfers delivered through mobile money using mobile-based identification.

*By Mouhamadou Ly and Solo Zerbo.*

### Annex Table 10.1. Traditional Banking Sector in CEMAC and Sub-Saharan Africa, Latest Available

### Annex Table 10.1. Traditional Banking Sector in CEMAC and Sub-Saharan Africa, Latest Available

### Traditional banking sector metrics (branches and ATMs)
- Table columns: No. of commercial bank branches per 1,000 km2; No. of commercial bank branches per 100,000 adults; No. of ATMs per 1,000 km2; No. of ATMs per 100,000 adults.
- Cameroon 2020: 0.70; 2.15; 1.64; 5.04
- CAR 2017: 0.03; 0.71; 0.06; 1.38
- Chad 2021: 0.06; 0.85; 0.12; 1.63
- Congo 2021: 0.28; 2.81; 1.16; 11.88
- Equatorial Guinea 2022: 2.10; 5.73; 4.67; 12.72
- Gabon 2013: 0.42; 9.29; 0.57; 12.85
- CEMAC Average: 0.60; 3.59; 1.37; 7.58
- WAEMU Average 2020: 1.86; 3.76; 2.44; 4.93
- SSA Average1 2020: 2.68; 4.24; 4.70; 11.26
- SSA Average2 2020: 7.66; 6.55; 15.90; 15.92

Notes:
- Source: IMF Financial Access Survey (2023).
- Footnote 1: Outliers such as Mauritius, Seychelles, São Tomé and Príncipe, Eswatini and Cabo Verde have been removed from the sample.
- Footnote 2: This Sub-Saharan African average refers to the simple average.

### Mobile money trends in CEMAC
- GIMAC reports both transaction volume and total value of mobile money have more than doubled since 2018, driven by increased usage in Gabon and Cameroon (Annex Figure 10.1, panels 1 and 2).
- Growth driver: increased mobile phone penetration responding to demand for accessible financial services among the unbanked population.
- Annex Figure 10.1 panels (descriptive):
  - Panel 1: Number of Mobile Money Transaction (Per capita) — series for 2018, 2019, 2020, 2021, 2022, 2023 for Cameroun, Centrafrique, Congo, Guinée Equatoriale, Tchad, Kenya, Gabon, CEMAC (transactions per capita scale shown up to 180).
  - Panel 2: Volume of Mobile Money Transactions (Per capita) — series for 2018–2023 for same countries (values shown up to 1,800,000 in CFA).

Source for figures: BEAC, GIMAC and IMF staff calculations.

### Digital infrastructure indicators (Annex Table 10.2)
- Table columns: Mobile Connectivity Index; Infrastructure Index; Affordability Index; Consumer Readiness Index; Content and Services Index.
- CEMAC Average: 37; 44; 30; 46; 33
- Cameroon: 49; 52; 44; 66; 39
- Central African Republic: 22; 18; 19; 22; 32
- Chad: 25; 44; 19; 23; 19
- Congo: 34; 53; 22; 46; 26
- Equatorial Guinea: 36; 36; 22; 49; 44
- Gabon: 53; 58; 53; 66; 39
- Regional comparisons:
  - SSA Average: 36; 42; 34; 44; 31
  - WAEMU Average: 39; 52; 35; 45; 30
  - EM Average: 42; 48; 42; 50; 33
  - LICs Average: 31; 43; 25; 36; 25

Source: Global System for Mobile Communications Association Dataset (2023). The GIMAC Index is based on a ranking range of score 0–100. Note: EM = emerging countries; LICs = low-income countries.

### Observations on digital payments and infrastructure
- Mobile money represents a significant opportunity for financial inclusion and economic growth in CEMAC by offering faster access and lower transaction costs, particularly for the unbanked.
- Structural impediments limit digital payment adoption: weaknesses in digital infrastructure, disparities across countries (Chad and CAR lag in affordability and available services), limited internet access, and unreliable electricity grids.
- Recommended collaborative focus: strengthening macroeconomic stability, protecting monetary sovereignty, establishing regulatory frameworks to manage potential risks, facilitating efficient cross-border payments, and fostering an integrated financial market.
- Supervisory stance: CEMAC supervisors actively monitor crypto-related risks and are developing appropriate regulatory frameworks.

### CBDCs and crypto assets in the CEMAC region
- CBDC development in CEMAC: exploratory; central bank assessing costs and benefits related to financial stability, monetary policy transmission, and necessary regulatory framework for a secure digital currency ecosystem.
- Crypto asset uptake in the region remains negligible despite global rise.
- COBAC regulations prohibit the use of crypto assets within CEMAC, including all cryptocurrency transactions and their use for valuing assets or liabilities of regulated financial institutions (see Annex 7 for details).
- Policy emphasis: regulations must evolve to accommodate emerging technologies, ensure consumer protection, and maintain financial stability.

### Case study: Central African Republic (CAR) and the Sango project
- April 22, 2022: CAR passed a law to introduce crypto assets as legal tender (alongside the CFA Franc) and launched the “Sango project.”
- Sango project objectives included:
  1. Launching a crypto asset called “Sango Coin.”
  2. Building the African Crypto Hub with a “Crypto Island.”
  3. Stimulating crypto-related activities and foreign investment via e-residency, citizenship, tax-free environment, and tokenization of natural resources.
  4. Promoting financial inclusion via mobile access and a “Sango App.”
- Planned issuance and fundraising:
  - Issue a total of 21 billion Sango coins over one year.
  - Target to raise about $2.5 billion (about 100 percent of GDP): $1 billion through Sango coins (4.2 billion tokens) and $1.5 billion through other offerings (6.3 billion tokens).
- Implementation status and actions:
  - May 6, 2022: COBAC decision banning banks from using crypto assets.
  - August 29, 2022: Constitutional court ruled “unconstitutional” aspects related to sale of nationality, e-residence, land and natural resources as in the Sango Genesis Paper.
  - April 6, 2023: CAR authorities agreed with BEAC to harmonize crypto legislation with the monetary union framework, including amending legal tender and guaranteed convertibility provisions.
  - No implementing decree has been issued to make the law effective.
  - Investor intake for Sango Coin has been low: by August 7, 2024, less than US$2 million worth of Sango Coin (0.2 percent of total planned issuance) is estimated to have been purchased; sales of citizenship, e-residency, and land property delayed.

Annex Table 11.1. Sango – Allocation and Release Schedule (selected rows)
- Allocation Type; Allocation %; Total Tokens to be released; Release Schedule; Minimum Investment
- Country’s treasury: 20.0%; 4,200,000,000; 4 years cliff, 6 years linear unlock - yearly; N.A.
- Foundation funds: 10.0%; 2,100,000,000; 2 years cliff, 8 years linear unlock - yearly; N.A.
- Rewards & incentives: 15.0%; 3,150,000,000; 2 years cliff, 8 years linear unlock - yearly; N.A.
- Liquidity: 5.0%; 1,050,000,000; 16.67% at Public Launch, 16.67% every 6 months; N.A.
- Market coins: 20.0%; 4,200,000,000; Genesis Cycle - Cycle 12; $500
- Land offering: 10.0%; 2,100,000,000; Cycle 1 - Cycle 12; $10,000; 10 years locking period
- Citizenship offering: 10.0%; 2,100,000,000; Cycle 1 - Cycle 12; $60,000; 5 years locking period
- e-Residence offering: 10.0%; 2,100,000,000; Cycle 1 - Cycle 12; $6,000; 3 years locking period
- Total: 100.0%; 21,000,000,000

Source for Sango allocation: Sango.org.

### Risks identified from CAR experience and from crypto assets as legal tender
- Macroeconomic and fiscal risks:
  - Volatility of crypto assets translates into volatility of public finances and the country’s debt burden if used for tax proceeds, spending, or borrowing.
  - Disruption of fiscal policy conduct.
- Monetary policy and financial stability risks:
  - Wide crypto asset use could impede BEAC’s ability to conduct monetary policy due to a parallel financial system, fluctuating money demand, and banking disintermediation.
  - Free convertibility between CFAF and crypto assets could risk accumulation of pooled reserves and create parallel capital flows that are hard to trace and control.
- Statistical and transparency risks:
  - Pseudonymity of crypto assets reduces transparency and traceability, limiting completeness and reliability of economic data and impeding risk assessment and policy calibration.
- Financial integrity and operational risks:
  - Increased financial integrity and corruption risks in the absence of strong institutions and legal frameworks.
  - Risk of loss of correspondent bank relationships if KYC procedures are constrained.
  - Households and businesses exposed to volatility, fraud, or cyber-attacks face potential wealth losses with limited recourse.
- Inclusion caveat:
  - Crypto assets may not reach the poorest segments due to weak electricity infrastructure, limited internet access, and underdeveloped technology platforms.

### Policy implications and recommended priorities (drawn from CAR lessons)
- Ensure consistency with CEMAC legal and regulatory framework when designing crypto frameworks.
- Prioritize harmonized, coordinated frameworks that:
  - Ensure monetary stability.
  - Manage macroeconomic and financial stability risks.
  - Protect consumers.
  - Foster AML/CFT compliance.
  - Create space for legitimate innovation.
- Identify, monitor, and mitigate fiscal risks stemming from projects like Sango.
- Build sound AML/CFT legal and regulatory frameworks with adequately skilled, resourced, and competent authorities.
- Institute clear and robust governance, comprehensive risk-management strategies, and review processes for multi-faceted projects.
- Consider mobile money as a more readily scalable route to increase financial inclusion.

### Bank of Ghana eCedi pilot (CBDC experience and results)
- Background:
  - BoG began researching CBDC in 2018.
  - eCedi officially announced in August 2021; pilot entered in September 2021.
  - Objective: modernize financial system, promote financial inclusion; token-based retail CBDC; zero interest; two-tier distribution model (central bank issuer and wholesale distributor; financial service providers retail distributors).
- Pilot phases:
  - Phase 1: eCedi Design (Design Paper published March 2022) — emphasized inclusion, regulatory certainty, resilience, user-centric design.
  - Phase 2: Adaptation of CBDC Solution (G+D Filia) — sandbox, security assessment, user acceptance, communication and training.
  - Phase 3: Field Testing — about four months, tested mobile apps, smart cards, POS, online and offline settings.
- Pilot results (BoG 2024):
  - Total transactions: GHS 473 million (value) and 96,000 (volume) during the pilot period.
  - Offline transactions: 0.004 percent of transaction value; 0.475 percent of transaction volume.
  - Consumer research: strong trust in eCedi; participants reported affordability, user-friendliness, safety, and service availability as key factors.
- Next steps and considerations:
  - Potential scaling to national level but nationwide rollout on hold due to recent economic developments and need for further technology partner discussions.
  - Policy considerations: balance innovation and financial stability; address data privacy, cybersecurity, and mitigate risks to monetary policy and financial intermediation.
  - International collaboration: BoG collaborated with Monetary Authority of Singapore (MAS); as of May 2024 BoG completed first proof of concept including a cross-border transaction with a Singaporean stablecoin, demonstrating potential for cross-border CBDC interoperability.
- Benefits noted:
  - Secure and efficient alternative to cash; reduced costs/risks of physical currency handling.
  - Real-time payments; enhanced speed and convenience.
  - Promotes financial inclusion for unbanked individuals.
  - Improves transparency and traceability, aiding AML efforts.

*Source: IMF Financial Access Survey (2023); BEAC, GIMAC and IMF staff calculations; Global System for Mobile Communications Association Dataset (2023); Sango.org; Bank of Ghana reports as referenced in the source text.*

### Conclusion

### Conclusion

### Key takeaways
- The Bank of Ghana’s eCedi initiative represents a pioneering move toward creating a more inclusive and resilient financial system.
- Navigating through the design, implementation, and pilot stages, the BoG’s eCedi has offered valuable insights for Ghana and other countries in exploring CBDCs and broader digital payment systems.

*IMF DEPARTMENTAL PAPERS  •    Digital Payment Innovations in Sub-Saharan Africa — Conclusion*

### 12. https://economictimes.indiatimes.com/nri/invest/india-launches-upi-rupay-card-services-in-sri

### References and Selected Citations — Digital Payment Innovations in Sub-Saharan Africa

### Major categories and thematic coverage
- Bibliographic compilation focused on digital payments, central bank digital currencies (CBDC), fintech, mobile money, regulatory frameworks, and financial inclusion in Sub-Saharan Africa and related global contexts.
- Includes IMF departmental papers, IMF working papers, IMF fintech notes, World Bank reports, BIS and ECB documents, FSB-IMF joint papers, academic journal articles, industry reports (McKinsey, GSMA), central bank publications, and press/media items.

### IMF and multilateral publications (selected entries preserved verbatim)
- International Monetary Fund (IMF). 2017. “The Informal Economy in Sub-Saharan Africa.” In Regional Economic Outlook, edited by Céline Allard. Washington, DC.
- International Monetary Fund (IMF). 2018. Casting Light on Central Bank Digital Currencies. Washington, DC, November.
- International Monetary Fund (IMF). 2020a. “Digital Money across Borders: Macro Financial Implications.” IMF Staff Report 2020/050, Washington, DC, September.
- International Monetary Fund (IMF). 2020b. “Legal Aspects of Central Bank Digital Currency: Central Bank and Monetary Law Considerations.” IMF Working Paper 2020/254, Washington, DC, November.
- International Monetary Fund (IMF). 2021a. E-Money: Prudential Supervision, Oversight, and User Protection. Washington, DC.
- International Monetary Fund (IMF). 2021b. The Rise of Public and Private Digital Money: A Strategy to Continue Delivering on The IMF’s Mandate. Washington, DC.
- International Monetary Fund (IMF). 2021c. “2021 Trends and Developments.” Financial Access Survey, Statistics Department, Washington, DC.
- International Monetary Fund (IMF). 2021d. Virtual Assets and Anti-Money Laundering and Combating the Financing of Terrorism (1). Washington, DC.
- International Monetary Fund (IMF). 2021e. Virtual Assets and Anti-Money Laundering and Combating the Financing of Terrorism (2). Washington, DC.
- International Monetary Fund (IMF). 2022a. Central African Economic and Monetary Community—Staff Report on the Common Policies in Support of Member Countries Reform Programs. Washington, DC, June.
- International Monetary Fund (IMF). 2022b “Digital Currency Innovations in Sub-Saharan Africa.” Analytical Note, Regional Economic Outlook, Washington, DC, October.
- International Monetary Fund (IMF). 2023a. “Central African Republic—Selected Issues Paper.” IMF Country Report 23/156, Washington, DC, May.
- International Monetary Fund (IMF). 2023d. “Elements of Effective Policies for Crypto Assets.” IMF Policy Paper 2023/004, Washington, DC, February.
- International Monetary Fund (IMF). 2023f. “How Should Central Banks Explore Central Bank Digital Currency? A Dynamic Decision-Making Framework.” IMF Fintech Note 2023/008, Washington, DC.
- International Monetary Fund (IMF). 2023g. IMF Approach to CBDC Capacity Development. Washington, DC.
- International Monetary Fund (IMF). 2023i. Financial Access Survey (FAS). Washington, DC.
- International Monetary Fund (IMF). 2024a. “Digital Money, Cross-Border Payments, International Reserves, and the Global Financial Safety Net.” IMF Note, Washington, DC.
- International Monetary Fund (IMF). 2024b. “Guinea-Bissau Is Using Blockchain to Improve Fiscal Transparency.” International Monetary Fund News, Washington, DC, October 2.

### IMF fintech notes, working papers, and related analyses (selected entries)
- He, Dong, Annamaria Kokenyne, Tommaso Mancini Griffoli, Marcello Miccoli, Thorvardur Tjoervi Olafsson, Gabriel Soderberg, and Herve Tourpe. 2023. “Capital Flow Management Measures in the Digital Age (2): Design Choices for Central Bank Digital Currency.” IMF Fintech Note 2023/009, International Monetary Fund, Washington, DC.
- Koonprasert, Tayo Tunyathon, Shiho Kanada, Natsuki Tsuda, and Edona Reshidi. 2024. “CBDC Adoption: Inclusive Strategies for Intermediaries and Users.” IMF Fintech Notes 2024/005, International Monetary Fund, Washington, DC.
- Lannquist, Ashley, and Brandon Tan. 2023. “Central Bank Digital Currency’s Role in Promoting Financial Inclusion.” IMF Fintech Note/2023/011, International Monetary Fund, Washington, DC.
- Murphy, Kieran P., Sun Tao, Yong Sarah Zhou, Natsuki Tsuda, Nicolas Zhang, Victor Budau, Frankosiligi Solomon, and others. 2024. “Central Bank Digital Currency Data Use and Privacy Protection.” IMF Fintech Note 2024/004, International Monetary Fund, Washington, DC.
- Reslow, Andre, Gabriel Soderberg, and Natsuki Tsuda. 2024. “Cross-Border Payments with Retail Central Bank Digital Currencies.” IMF Fintech Note 2024/002, International Monetary Fund, Washington, DC.
- Ricci, Luca Antonio, Calixte Ahokpossi, Anna Belianska, Khushboo Khandelwal, Sunwoo Lee, Grace Li, Yibin Mu, and others. 2024. “Central Bank Digital Currency and Other Digital Payments in Sub-Saharan Africa: A Regional Survey.” IMF Fintech Note 2024/001, International Monetary Fund, Washington, DC.
- Soderberg, Gabriel, John Kiff, Hervé Tourpe, Marianne Bechara, Stephanie Forte, Kathleen Kao, Ashley Lannquist, and others. 2023. “How Should Countries Explore Central Bank Digital Currency?” IMF Fintech Note 2023/008, International Monetary Fund, Washington, DC.
- Tourpe, Hervé, Ashley Lannquist, and Gabriel Soderberg. 2023. “A Guide to Central Bank Digital Currency Product Development.” IMF Fintech Note 2023/007, International Monetary Fund, Washington, DC.
- Lannquist, Ashley, and Brandon Tan. 2023. “Central Bank Digital Currency’s Role in Promoting Financial Inclusion.” IMF Fintech Note/2023/011, International Monetary Fund, Washington, DC.

### Academic studies, working papers, and topical research (selected entries)
- Mbiti, Isaac, and David Weil. 2016. “Mobile Banking: Impact of M-Pesa in Kenya.” In African Successes: Volume III: Modernization and Development, edited by Sebastian Ed, Simon Johnson, and David N. Weil.
- Suri, Tavneet, and William Jack. 2016. “The Long-Run Poverty and Gender Impacts of Mobile Money.” Science 354 (6317): 1288–92.
- Erel, Isil, Jack Liebersohn, Constantine Yannelis, and Samuel Earnest. 2023. “Monetary Policy Transmission through Online Banks.” Fisher College of Business Working Paper 2023-03-015, Charles A. Dice Center Working Paper No. 2023-15, Ohio State University, Columbus, May 25.
- Erumban, Abdul A. 2024. “Informality and Aggregate Labor Productivity Growth: Does ICT Moderate the Relationship?” Telecommunications Policy 48 (1): 102681.
- Gertler, Paul, Brett Green, and Catherine Wolfram. 2021. “Digital Collateral.” NBER Working Paper 28724, National Bureau of Economic Research, Cambridge, MA, May.
- Oh, Eun Young, and Shuonan Zhang. 2022. “Informal Economy and Central Bank Digital Currency.” Economic Inquiry 60 (4): 1520–39.
- Mbiti, Isaac, and David Weil. 2016. “Mobile Banking: Impact of M-Pesa in Kenya.”

### Industry, central bank, and regulatory sources (selected entries)
- Global System for Mobile Communications Association (GSMA). 2021. “The Mobile Money Regulatory Index 2021: Regional & Country Profiles.” London.
- Global System for Mobile Communications Association (GSMA). 2023. “The Mobile Economy Sub-Saharan Africa 2023.” GSMA Intelligence, The Mobile Economy, London.
- Global System for Mobile Communications Association (GSMA). 2024. “The State of the Industry Report on Mobile Money 2024.”
- McKinsey and Company. 2022. “The Future of Payments in Africa.” Chicago, September.
- McKinsey and Company. 2024. “From Ripples to Waves: Transformational Power of Tokenizing Assets.” Chicago, June.
- Bank for International Settlements (BIS). Frost, Jon, Priscilla Koo Wilkens, Anneke Kosse, Vatsala Shreeti, and Carolina Velásquez. 2024. “Fast Payments: Design and Adoption.” BIS Quarterly Review, March.
- European Central Bank. 2023. “A Stocktake on the Digital Euro.” Frankfurt.
- Financial Stability Board (FSB) and International Monetary Fund (IMF). 2024a. “Cross-Border Regulatory and Supervisory Issues of Global Stablecoin Arrangements in EMDEs.” July.
- Financial Stability Board (FSB) and International Monetary Fund (IMF). 2024b. “G20 Crypto-Asset Policy Implementation Roadmap.” Status Report, October.

### Country- and region-specific initiatives and data sources (selected entries)
- Ghana Interbank Payment and Settlement Systems (GhIPSS). 2024. “GhIPSS Update, Q1 2024.”
- La Banque Centrale des Etats de l’Afrique de l’Ouest (BCEAO). 2024. “Lancement de La Phase Pilote Du Système de Paiement Instantané Interopérable de l’Union Economique et Monétaire Ouest Africaine.”
- South African Reserve Bank (SARB). 2018. “The National Payment System Framework and Strategy Vision 2025.”
- South African Reserve Bank (SARB). 2023. “Press Release on the Launch of Payshap—A Digital Payment Service.”
- South African Reserve Bank (SARB). 2024. “National Payment System Regulatory and Oversight Report, 1 April 2023–31 March 2024.”
- Settlement Statistics and Indicators. 2024. “SADC-RTGS Settlement Statistics and Indicators.”

### Media, press, and miscellaneous references (selected entries)
- Reuters. 2022a. “Flutter Wave Adds Nigeria’s Enaira as Payment Option for Merchants.” September.
- Reuters. 2022b. “Grocery Retailer PickandPay to Start Accepting Crypto Currency Payment.” November 1.
- Financial Times. n.d. “UK Digital Pound Could put Financial Stability and Privacy at Risk, MPs Warn.”
- Wexler, Alexandra. 2023. “In Africa, FTX Posed as Haven from Tumbling Currencies, Inflation––WSJ.” Wall Street Journal, January 18.

### Identifiers and publication metadata preserved exactly
- Digital Payment Innovations in Sub-Saharan Africa
- 232220798400
- ISBN 9798400232220
- Page markers in source: 111, 112, 113, 114, 115, 116, 117, 118

*Source: Excerpted references from "Digital Payment Innovations in Sub-Saharan Africa" (IMF departmental paper content provided in the supplied PDF excerpt).*

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_Source: https://www.imf.org/-/media/files/publications/dp/2025/english/dpdpiea.pdf_