Despite leading the world in mobile money adoption, Africa remains heavily reliant on cash, limiting access to credit, driving up transaction costs and holding back small businesses. A new report argues that the next challenge is not building digital infrastructure, but making digital payments more attractive than cash.
Share
Africa’s continuing dependence on cash is costing the continent billions of dollars annually in lost economic opportunities, higher transfer costs and restricted access to credit. This is according to a report published by Affinity Africa, a Ghanaian digital financial services company. The report was produced in collaboration with the Mo Ibrahim Foundation and Yale University’s International Leadership Center.
The report, “Breaking the Cash Equilibrium: Unlocking Africa’s Digital Financial Future”, argues that Africa’s cash dependency is no longer a technology problem but rather one of incentives. While the continent now accounts for 74% of global mobile money transaction volume, processing more than $1.1 trillion across 1.1 billion accounts in 2024, more than 90% of that is still withdrawn as cash, rather than circulated digitally as payment for goods and services.
For a street vendor or informal merchant, the report notes, accepting physical cash costs nothing and settles instantly. Conversely, accepting digital payments imposes a 1% to 3% transaction fee and requires some digital literacy.
This is despite the fact that Africa’s vast mobile money infrastructure has enabled it to extend digital financial services to hundreds of millions of previously excluded people. Commenting on the report, Affinity’s founder and group chief executive officer, Tarek Mouganie, said, “The gap between the financial infrastructure Africa has built and the economic behaviour it was supposed to change is vast, and the cost of that gap compounds every year.”
In Nigeria, for example, an aggressive push toward debit cards and point-of-sale (POS) terminals has created a network of about 2 million POS agents in cities such as Lagos. Rather than eliminating cash, however, these digital rails often serve as more efficient channels for distributing physical currency, reinforcing rather than replacing cash-based transactions.
Similarly, in Ethiopia, the rapid rollout of the national digital ID system, Fayda, and the mobile money platform Telebirr has encountered significant trust barriers. Some users report keeping cash reserves because of system outages during critical situations, including late-night medical emergencies, while others deliberately avoid creating digital financial records out of concern that pooled family funds or household remittances could be misinterpreted by authorities as taxable personal income.
According to the report, the narrow use of digital money has a wide-ranging impact on the continent’s growth agenda. For example, small and medium-sized enterprises, which account for about 80% of jobs and 90% of privately owned businesses across Sub-Saharan Africa, receive only 5.4% of bank credit.
The report argues that because many businesses operate entirely in cash, they generate little or no transaction history, making it difficult for lenders to assess their creditworthiness. As a result, banks continue to favour large corporations and government securities over smaller enterprises. Currently, the report points out, the sector faces a $300bn annual financing gap, owing to its sclerotic access to credit.
Another impact is felt in cross-border payments where costs remain high. In one example cited in the report, sending $200 from Tanzania to neighbouring Uganda cost 39.1% in fees, while sending the same amount from the United States to Nigeria cost just 2.3%. The report estimates that African households lose approximately $8bn annually in remittance fees.
To address the challenge, the authors recommend joint action from governments, regulators, financial institutions and technology firms. The actions they propose include making digital payments cheaper than cash withdrawals, mandating interoperability between payment platforms and creating stronger incentives for consumers and businesses to keep money within the digital financial system through access to credit, savings, insurance and other financial services.
The report identifies Ghana, Kenya, Nigeria and South Africa as “catalytic markets” where the challenge is no longer access to digital finance but deepening its use throughout the economy. It recommends that these countries should prioritise merchant acceptance, real-time payment interoperability and regulatory reforms that enable digital financial products to scale.
Drawing lessons from international examples, the report points to India’s digital public infrastructure programme, which helped create more than 500 million bank accounts and enabled over 100 billion annual digital payment transactions, and Brazil’s PIX instant payments system, which processed more than 40 billion transactions by the end of 2023 and significantly reduced cash usage.
The authors conclude that Africa has already built much of the digital infrastructure required for financial transformation. The challenge now is ensuring that digital payments become cheaper, more useful and more attractive than cash for consumers and businesses alike. With Africa’s population projected to account for one in four people globally by 2050, they argue that the cost of delaying that transition will only continue to rise.