The Central Bank of Kenya building in Nairobi.
Early this month, the Central Bank of Kenya (CBK) announced its intention to introduce a digital currency.
It has invited public comments to evaluate the role and applicability of a potential Central Bank Digital Currency (CBDC).
According to the regulator, CBDC is intended to serve as a legal tender similar to the usual notes and coins but transacted in electronic form. As a legal tender, it must have money features of acceptability, durability, portability, divisibility, uniformity and limited supply.
Various economic analysis extrapolate the digital economy to be worth $23 trillion by 2025 and returns on ICT Investment will be 6.7 times higher than other sectors.
Kenya boasts a widespread digital infrastructure estimated to be worth $5.48 billion, contributing seven percent to the country’s gross domestic product (GDP).
According to the Organisation of Economic Corporation and Development (OECD), digital inclusion is key to economic empowerment of the marginalised groups and can contribute to greater gender equality.
The uptake of digital tools has gone up significantly, partly with the Covid-19 disruption.The internet, digital platforms, mobile phones and digital financial services offer ‘leapfrog’ opportunities for all and can help bridge the divide by giving women,youth and people with disability the possibility to earn additional income, increase employment opportunities, and access knowledge and general information.
However, a good part of Kenya’s population, especially in the rural areas, still lag in digital adoption and access to internet.
A report by the Kenya Digital Rights and Inclusion, 2020 determined that heavy taxation of IT equipment, devices and telecoms services, limited access to fibre and broadband connectivity, high costs of fibre installation, among others, were key constraints to the digital penetration in Kenya.
OECD justifies that hurdles to access, affordability, lack of education as well as inherent biases and sociocultural norms curtail women and girls’ ability to benefit from the digital transformation opportunities.
They emphasise a need for policymakers to seize the digital expansion opportunity to foster greater gender equality in the labour market, boost economic growth and build a more inclusive, digital world.
The World Bank adds that accessibility to capital, limited domestic market, availability of data in user-friendly formats, location bias favouring major tech hubs within Kenya and agglomeration of talent and capital in global hubs.
A report by the Center for Global Development says from 2013 the digital gap has generally narrowed in developed economies including the USA, Europe, as well as in Arab States by about three percent, 1.5 percent and two percent respectively whereas it widened in Least Developed Countries and in Africa by three percent and four percent in that order.
For the planned digital currency roll-out to succeed, the State must ensure a stronger trust environment, including robust data protection, privacy legislation and regulations.
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