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Central Bank of Kenya: CBDC not silver bullet for financial inclusion

kenya shilling currency

This week during the BIS Innovation Summit, Patrick Njoroge, Governor of the Central Bank of Kenya (CBK), argued that it was important not to see Central Bank Digital Currency (CBDC) issuance as “a silver bullet for inclusion”.

Kenya has made significant progress in financial inclusion, particularly thanks to the M-Pesa, the mobile payment service launched by Vodafone in 2007. Since then, financial inclusion has risen to about 83%. While this puts Kenya further ahead of other African nations, financial exclusion remains a concerning issue, where the country has hit diminishing returns in its efforts to further the cause. 

The governor stressed that the people who remain excluded from the current network of payments are unlikely to be reached through CBDCs. He cited cultural norms as a key barrier to financial inclusion. For example, in some areas, women traditionally are disadvantaged and lack access to cell phones and hence the mobile payment system. These women are likely to continue being excluded even if a CBDC were issued. Furthermore, despite Kenya’s high phone penetration, only 53.4% are smartphones. 

“The point here is let’s not look at CBDCs as the silver bullet for all the problems that we have. On the contrary, deal with the problems directly,” said Njoroge.

When asked if Kenya is keener on a hybrid or direct model for a CBDC, the governor replied that while it was legally not possible for consumers to hold CBDC at the moment directly, it would be a relatively straightforward process to change the law if desired. 

His focus remains on the central bank’s role as a public institution to regulate financial stability and control monetary policy for the public good. As part of this, the central bank has been doing research on the CBDC landscape and its compatibility with the Kenyan economy, publishing a discussion paper as well as maintaining dialogue with the public.