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Is Ghana Ready to Adopt Digital Money?

Given the progressive concept of the evolution of money through the ages, it is very evident the next stage in the development of money will transcend cash entirely and exist purely as digital information. How so? Let’s recap, shall we?

The ideological Age of Bartering introduced the foundational concept of exchange, where value existed solely in satisfying the coincidence of wants in a direct exchange of items and, even, services. Some items, however, came to be perceived as having intrinsic value even when not involved in an exchange. Those commodities, like gold and silver, successfully mediated between exchanges as money and nullified the coincident of wants which became more and more impractical in the Commodity Age. Then came the banks, for gold and silver needed to be kept safe and secure for obvious reasons. In doing so, banks issued out paper receipts or bank notes whose assurance represented the value of the commodity money deposited. So, even though the banknotes were intrinsically worthless, its representational value was enough to serve as money in the Age of Representation. The popularity of this innovation gave rise to the fear that banks could issue out more notes than what they had gold or silver for; in which case, the representative money would be worthless. In stepped the government, to rid banknotes of their gold and silver shackles. By a government decree or fiat, a banknote on its own could successfully serve as money in the Age of Fiat. Value was grounded only in the authority of the government for a banknote to serve as a legal tender.

This brings us to what many will call the Digital Age of today (like I did). But that is really a misnomer. The advent of digital computing meant that fiat money could now be represented by digital records in electronic databases and, hence, on store-value mediums like electronic cards and smart devices.

This is simply a new kind of representative money, where electronic records of value are only backed by the corresponding fiat money deposited at a financial institution. So, this is really the Age of Digital-Representation.

From this progression, it is easy to see why our current phase is actually a transition phase that is setting the stage for the next evolution (like the original Age of Representation did for the Age of Fiat) where digital-representative money will wholly transcend fiat money to just digital money (like paper notes transcended gold and silver) in a cashless society—a true Digital Age.

Granted, none of the envisioned ages in the evolution of money existed in isolation once upon a time. If this presentation is merely a useful visualisation of how money developed, a more accurate picture is that of an overlap of eras where multiple developments existed at the same time as one gained prominence while others phase out and others emerged. In fact, we’re observing that very phenomenon today.

Thanks to innovations in mobile money and mobile banking, exclusive reliance on cash are steadily phasing out even if the world is still based on fiat money—at least in digital representation. There are however rising pockets of the world that are going totally cashless, as can be seen in the rise and adoption of bitcoin. The Cash Learning Partnership, for instance, reports that “in recent years there has been a significant move towards cashless economies, both by governments and businesses.” More than a passing trend, a cashless economy also “presents an opportunity for stimulating economic growth and financial inclusion in both developed and emerging markets.”

So, the board is set. The pieces are moving. In this game of embracing the future of money today, where lies Ghana? Is Ghana ready? But how ready? How do we even begin to empirically gauge such readiness?

Digital Money Readiness Index

In 2014, Citi and Imperial College London held their second Digital Money Symposium in London where they presented their jointly developed Digital Money Readiness Index to provide a scientific and quantitative method to the matter of digital money adoption. Their ground-breaking proposal and approach provided the empirical foundation for evaluating indefinite non-qualitative terms, how ready a particular country is to adopting digital money.

In the pioneering paper entitled Getting Ready for Digital Money: A Roadmap, the report straightforwardly opened this way:

“In a pervasively electronic world, the flow of money can interconnect cities, energise economies and galvanise communities. As online, mobile and network advances continue to rapidly integrate digital money into our socioeconomic fabric, we are presented with attractive opportunities to open digital commerce to one and all. But how ready are we?”

The entire thesis was built on the novel theoretical groundwork of envisioning digital money as a sociotechnical system, which suggested that readiness to adopt digital money depended on four pillars: Institutional Environment, Enabling Infrastructure, Solution Provision, and Propensity to Adopt.

The Institutional Environment pillar considers the national institutional features, like the government’s support for innovation, which can provide fertile a ground on which digital money needs to take root. The pillar of Enabling Infrastructure encompasses the financial and technological infrastructure necessary for the digital money to operate. Solution Provision consists of the provision of solutions that drive the supply of digital money. And Propensity to Adopt captures consumer demand of innovation.

This conceptual framework demarcated by the four pillars is further defined by respective indicators from which numerical scores can be derived to provide a quantitative measure or index of each pillar. A composite index score can then be computed from the derived scores of the four pillars to give a final value on the readiness to adopt digital money.

For a detailed explanation of the methodology involved in arriving at a digital money readiness score and the interpretations of it thereof, see the companion paper on the subject in addition to the original report.

While digital-money adoption foreshadows great returns and has become a subject of importance for governments internationally, the rate or level of adoption is clearly mixed—ranging from the high end of the readiness spectrum to the low end. The beauty of this study is that, when conducted across multiple samples, the index score of each country can be grouped and ranked in order of magnitude to provide a comparative readiness gradient from the least ready to the readiest.

This topology in cluster led to the major insight that there were generally four stages of readiness across the gradient irrespective of any relative comparison. That is, independent researchers can determine the stage a country is positioned in without the need to rank it against other countries. In ascending order, they are: Incipient, Emerging, In-transition and Materially Ready.

Countries in the Incipient stage are usually marked by limited financial services and lack of basic ICT infrastructure. Those in the Emerging stage have all the Incipient Stagers lack but may, themselves, lack enforcement of existing regulation, and have more consumers preferring cash. The In-transition stagers have resolved such challenges but need to invest more to drive adoption. Those Materially Ready only need to prove the usefulness of digital money.

So, Where Lies Ghana on the Readiness Scale?

The rigorous and explanatory power packed into the Digital Money Readiness Index has, undoubtedly, provided a reliable means to explore the question of where Ghana situates on the Digital Money Readiness scale (To all tertiary business students: This could be a fine research topic). Thankfully, however, Ghana was included among the 90 countries studied in the original 2014 paper and all subsequent annual reports. This has been the scene so far:

In the 2014 study, Ghana was grouped in the Emerging stage of the index. it meant that, for Ghana, “the basic ICT infrastructure and financial services [were] in place, and the relevant regulation [was] on the books.” The challenges, however, were: “the presence and size of the informal economy; (perceived) lack of enforcement of existing regulation, both for consumers and corporates; lack of ICT ubiquity and affordability; and consumer preference for cash.” The study remarked that Ghana had “made progress, not only due to investments in mobile infrastructure but also due to regulation that enabled MNO-led mobile money initiatives.”

In the 2015 report, Ghana maintained its presence in the Emergence stage with a relative ranking of 64 out of 90. Listing Ghana as an example of notable progress, the report noted how “readiness improvements were largely a result of improvements in the ease of doing business, coupled with local innovation and entrepreneurship”, for “an innovative local market . . . can help the emergence of new technologies such as digital money solutions.”  It, nonetheless, stated point-blankly that “these examples are grass shoots; for the most part countries in this quartile need to continue progressing industry-specific digital money solutions (Emphasis Mine).” In other words, Ghana had a lot more room for improvement to move upwards to the In-transition stage.

The 2016 report saw Ghana still resolute in the Emergence stage but dropping three points in relative ranking to 67 out of 90. The original report specified that: “Emerging countries can help their standing by improving the ease of doing business and providing incentives and education for digital money adoption”, and “countries with strong institutional environments – more secure property rights and market-friendly business norms – are better positioned to attract investment” in digitization and digital commerce.

Can Ghana now move up the ladder from its emerging state?  

Not according to the 2017 report. No, Ghana did not even maintain its emerging status at the very least. It moved down to the Incipient group as it dropped further in relative ranking to 69 out of 90, just about scratching the bottom of the Emerging stage with only a point below its range –  as if to say: “Hey I don’t belong here.”

On paper, it seems to me Ghana is likely to limp between the lower quartiles of incipience and emergence in the interim, for Ghana has, sadly, shown little evidence of moving up to the upper quartiles despite the modest praise and hopeful acknowledgments the early reports kindly cited. The researchers, in their original study, expressed the hope that the Digital Money Readiness Index “will allow stakeholders including governments and policymakers to recognize their nation’s current level of [readiness] and provide a perspective on how to move up the next stage or move higher within the same stage.”

The benefits to the government, businesses, and consumers are well spelt out. So, people of Ghana, this is how ready our country is to adopting digital money; emerging for, at least, three years, and now incipient.

The board is long set and the pieces are still moving! Ghana, your move!


Richard Yaw Baafi
Richard Yaw Baafi

Richard Yaw Baafi is a Writer and Senior Editor at siro360 covering just about everything profound and intriguing. He has a bachelor’s in Banking and Finance from the University of Professional Studies, Accra, where his paper on Internet Banking garnered the highest appraisal. And true to the thinker that he is, he believes storytelling thinking, much like computational and design thinking, is a major lens through which the world can be understood, for everything is a story.