Central Bank of Kenya can be schooled by Senegal’s eCFA, as it seeks to introduce and experiment with its Central Bank digital currency.
In 2016, Senegal took a journey of then unfamiliar digital currencies and was among the first African countries to experiment with Central Bank Digital Currency. The launch was marred with controversy and confusion, which ended with, the Central Bank of Senegal, the Central Bank of West African States, distancing itself from the digital currency, making the project not see the light of day. What learning’s can Kenya take from Senegal eCFA?
To get the learning; let’s first start by understanding Senegal’s approach. The Central bank Digital currency (CBDC) was launched by a Regional bank BRM bank, Banque R’gionale de March’s SA. The coin was called, eCFA. As a rule of thumb, Central banks are tasked with the responsibility to monitor monetary policies in the country. The purpose of the CBDC according to BRM bank was; to ensure the citizens had universal access to financial services. Secondly, was to ensure high liquidity, interoperability with existing products, and lastly to ensure that there was an increased level of transparency in transactions. But was the country ready for the launch of a digital coin? That was the question in many economists’ minds. First of all, like many African countries, Senegal’s population is mostly made of farmers and they are based in rural areas. Secondly, most of the financial products had not permeated the largely rural population, and lastly, very few people had bank accounts a common problem in most African countries.
Once the CBDC was launched, banks disclosed their goal of distributing the CBDCs to the neighboring countries. After the launch of the coin, the Central bank distanced itself from the CBDC and warned against marketing the coin under eCFA as it would create confusion with the printed currency, CFA; this resulted in the coin failing to meet the first criteria and was removed as a potential CBDC.
The major key learning from Senegal’s CBDC launch for any country seeking to launch its digital coin is; it’s important to ensure that all the stakeholders within the financial ecosystems agree with all the decisions before proceeding to mint the coins.
Unlike Senegal, Kenya has taken a different approach; the Central bank of Kenya has taken the driver seat in the CBDC vehicle. This means that the success and the failure of the CBDC willfully lie with the Central Bank. Secondly, a discussion paper that was circulated to the Kenyan population, has invited opinions and views of all stakeholders within the financial ecosystem and other interested people. And lastly, has benchmarked the proposed CBDC against others already launched in other countries.
In a recent interview with a leading local news house, the CBK Governor, Dr Patrick Njoroge, was categorical in stating that the recently issued discussion paper was an invitation to the general public to give their views on digital currencies and not necessary finalization of a process. The governor further expounded that the CBDC goal was to ensure that there was an improved payment process in the country. Other purposes of the CBDC would be to provide included financial inclusion, although Kenya’s financial inclusion was at 85%, and ensure the lowering of cross border transactions.
As Kenyans eagerly wait for the testing and implementation phases of the CBDC, We can only hope that unlike the eCFA and Tunisian Central Bank Digital Currency, the Kenya central bank digital currency will see the light of day and become a success story and a beacon of hope to other African countries.