Interview: Archie Hesse
How does cash dependency affect payment efficiency and the economy as a whole?
ARCHIE HESSE: Cash transactions are very influential. Cedi notes are not printed in Ghana, and the cost to produce lower-denomination notes is higher than their value. There are also costs related to the disposal of deteriorated notes. Part of those costs can be invested towards moving from a cash-dominated economy to one that is more dynamic and digital. This will bring substantial savings in the long term.
A robust payment system could be as important as a stable power supply: it facilitates commerce, creates transparency and generates efficiencies across all sectors of the economy. We expect that, by further improving the payment landscape, GDP could increase by a couple of percentage points. Fortunately, the country is already moving in that direction at an accelerated pace.
What role has the e-zwich system played in advancing the financial inclusion agenda?
HESSE: The move towards electronic platforms, as well as an increase in the size of the banked population, was essential for financial inclusion. Banking services were still not widely available in rural areas, and transactions in key agricultural segments, such as cocoa, were made largely in cash. There was a need for a mechanism to ease the process of opening an account, and to address challenges regarding electricity supply that prevented the full deployment of traditional financial services.
The e-zwich biometric system was introduced to address some of these challenges and has a wide range of potential applications, which has lessened the burden for banks in terms of reach and also covers Know Your Customers procedures. It acts as a fully fledged bank account issued by a licensed financial institution and streamlines payroll systems through its payment distribution engine. The benefits are being realised, and its convenience is even more relevant for rural areas, and for the unbanked and underbanked. The e-zwich system is used by several government and non-governmental agencies. Its biometric search engine feature makes it ideal for payroll audit, while assuring customers that their funds are safe on the card.
Overall, a combination of greater awareness of the functionality of the e-zwich system and increased deployment of point-of-sale terminals in rural areas and merchant locations are the key to expanding the reach of transactions in the next few years. The next step is continuous engagement with government as well as public education to increase usage and expand savings.
How do mobile money (MM) and other technology platforms affect financial inclusion in Ghana?
HESSE: MM plays a significant role in financial inclusion, especially as affordability of technology increases and mobile infrastructure further expands. In principle, its concept and function is not that different from e-zwich: it is also an electronic ledger in which the funds ultimately reside in banks. There are three critical instruments Ghana is using to achieve financial inclusion – bank accounts, e-zwich and MM wallets. This has been referred to as the financial inclusion triangle. The first step was to ensure banks were interoperable, which has already been achieved. The e-zwich system has also improved accessibility to banking and retail services for the unbanked and underbanked. The second step, currently under way, is to ensure interoperability between telecommunications operators within the MM space. This will allow MM subscribers to move money across MM networks, and also from their MM wallets to their bank accounts, and vice versa.
The project will also enable transfer from MM wallets to e-zwich cards. This will allow for a fully interoperable environment. The country is well positioned to achieve this because it has a solid existing infrastructure and full institutional support – the government is in alignment with the goal of increasing financial literacy and attaining a cashless economy in the short to medium term.
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