Going Cashless: How Does it Help Ethiopia’s Economy?


A cashless economy can modernize a developing economy by reducing corruption and organized crime and ensuring equitable societal growth. But what about its drawbacks?

Amole, M-Birr, Hello-cash, Telebirr, and many more; these names indicate the steps Ethiopia is taking to wean its economy off of cash. Despite being one of the largest in the continent, Ethiopia’s economy is still heavily dependent on cash. Such dependency has presented various problems in Ethiopia’s economy. The government seems to understand this, as it is taking bold steps to integrate digital systems into daily transactions. In fact, recently, the government announced that all fuel transactions in the capital would be conducted through electronic payment methods. Actions like these show that the government strongly urges people to move away from cash.

In a cashless economy, transactions are completed digitally rather than with actual money. Currently, there aren’t any entirely cashless economies. However, developed countries like Norway are getting close. In developing economies like Ethiopia, a cashless economy offers numerous advantages and can modernize its economy. So, what are these advantages?

1. Reduced Corruption

Ethiopia, like many other developing nations, struggles greatly with corruption. It is widespread and often difficult to eradicate. Our reliance on cash has also contributed to the problem. Cash transactions are usually difficult to track and can be conducted “off the record”. This creates a suitable environment for corruption and illegal activities. We occasionally hear accounts of audits conducted by government agencies where a particular sum of money was missing. Cashlessness would solve this problem. Digital transactions often have a “footprint” that can be traced back to the transactors, which aids in the reduction of fraud and corruption. Furthermore, digital transactions make it easy to monitor and track taxable transactions, which results in increased tax compliance and generates greater revenue for the country.

2. Improved Safety and Security

If you ever have to buy something costly in Ethiopia, you probably have to withdraw a large amount of cash from your bank and carry it around. This could be the equivalent of drawing a target on your back. People who carry big sums of cash frequently have a higher risk of being robbed. Carrying cash is not safe for you or your money. Without hard cash in circulation, however, there is less likelihood of theft or robbery, making people and assets safer.

3. Cost Reduction

Hard cash is in high demand in an economy that relies heavily on cash. Governments invest large amounts of money to produce and distribute hard cash throughout the country. Furthermore, hard cash usually gets old and damaged through time and usage and thus must be replaced constantly. As a result, the nation is forced to shoulder a heavy financial load in order for its residents to conduct business. By eliminating the use of cash, the cost and effort required to print, distribute, and secure physical money are reduced. These savings can be directed towards more productive sectors of the economy.

Apart from the above-mentioned advantages, a cashless economy helps Ethiopia in many more ways. It provides more efficient and convenient payment methods for its users. It also encourages foreign investment and tourism as foreigners don’t have to carry large amounts of cash to visit the country. But a cashless economy is not without risk.

Are there any drawbacks?

The main drawback to a cashless economy is that its difficult to implement in developing nations. The benefits of a cashless economy described above hold true as long as digital infrastructure and services are accessible to all facets of society, particularly those who may not have official identities or restricted access to technology. Ethiopia’s rural population still faces difficulty accessing networks, electricity, and formal identity (ID cards). If the development of a cashless economy doesn’t start with providing the necessary infrastructure, it will lead to the marginalization of certain populations from the economy.

In addition, cybersecurity is a looming threat in digital transactions. In Ethiopia, digital payment frauds are already impacting the small progress Ethiopia has made toward achieving cashlessness. Steps must be taken to address the security concerns facing digital transactions if Ethiopia is going to make any meaningful progress.

Despite these drawbacks and risks, the advantages of a cashless economy cannot be overstated. It provides greater economic efficiency and transparency. With a proper implementation that seeks to include all members of society, a cashless economy would greatly benefit the individual and the country as a whole.

Comments (1)
No comments yet