A new Africa-focused report says the continent’s heavy reliance on cash is holding back financial inclusion, small business growth and government revenue, even though Africa has already built some of the world’s most advanced digital payment infrastructure. The report argues that the problem is not technology itself, but the incentives and institutions that still make cash the most practical choice for millions of people.
The report, The State of Cash Dependency and Digital Financial Inclusion in Africa, says Africa’s digital rails have expanded far beyond bank branches, yet cash remains the default for buying food, paying rent, settling debts and running informal businesses. It says this gap is most visible among street vendors, migrant workers and small traders, for whom cash is still cheaper, faster and more reliable than digital alternatives.
According to the report, over 90 percent of mobile money value is still withdrawn as cash at the point of receipt rather than staying in the digital system. It says this “cash-in/cash-out” pattern limits the usefulness of digital finance because people may receive money digitally but still revert to cash for daily transactions.
The report also says cash dependency has serious economic consequences. When transactions do not leave a digital record, lenders cannot properly assess creditworthiness, which makes it harder for small and medium-sized enterprises to access finance. It adds that governments lose visibility over large parts of the economy, weakening tax collection and limiting the resources available for public services.
One of the report’s central findings is that Africa’s financial challenge is not lack of access alone, but the failure of digital systems to outperform cash at the level of everyday decisions. It says many merchants still prefer cash because accepting digital payments can involve fees, while consumers keep cash because merchants often require it. The result, the report says, is a self-reinforcing cycle that keeps cash dominant.
The study identifies several barriers to change, including fragmented regulation across African countries, weak interoperability, identity and documentation gaps, unreliable agent liquidity and low trust in digital finance. It says these problems are not evenly distributed, and that policy responses must differ from one country to another depending on how advanced its payment systems already are.
The report calls for three major shifts: making digital payments cheaper than cash for merchants, mandating real-time interoperability across providers, and building stronger financial products such as credit, savings and insurance on top of payment rails. It also urges governments to digitize public payments, modernize digital identity systems and support the regulatory environment needed for broader adoption.
The report groups African markets into three broad categories: catalytic markets such as Kenya, Nigeria, Ghana and South Africa; tipping-point markets including Ethiopia, Tanzania, Uganda, Rwanda and the Democratic Republic of Congo; and nascent markets where basic connectivity, identity systems and institutional trust remain the main constraints.
Its broader conclusion is that Africa does not need to start from scratch. The infrastructure, innovation and entrepreneurial capacity already exist, but stronger governance, better incentives and coordinated policy are needed to make digital finance the norm rather than the exception.
