By Dr. Faith Ababio-Twi
Ghana’s heavy reliance on cash transactions remains a major driver of corruption and inflation. Despite the availability of modern payment systems such as debit and credit cards, electronic transfers, and mobile banking, cash continues to dominate financial transactions, creating an enabling environment for financial misconduct.
The preference for cash in government transactions, private business dealings, and daily financial activities makes it difficult to track money flow, leading to widespread bribery, money laundering, and unaccounted expenditures.
A fundamental issue in Ghana’s cash-dependent system is the disbursement of tax funds during government meetings. Reports indicate that both lawmakers and executive officials prefer handling cash, a practice that fosters corruption and weakens financial transparency. In a digital economy, such transactions would leave an electronic trail, making it easier to detect fraudulent activities and hold individuals accountable.
The excessive use of cash also contributes significantly to inflation. The Bank of Ghana, which is responsible for regulating money circulation, does not have an accurate record of cash in the system, making monetary policy implementation difficult. The overwhelming presence of GHS 200 and GHS 100 notes in circulation has fueled inflationary pressures, yet the central bank has remained silent on the issue.
A disturbing reality is the daily sight of individuals withdrawing or depositing large sums of cash at banks, sometimes spending the entire day counting money with tellers. In a well-regulated economy, cash transactions of this nature would be rare, as electronic payments would provide a safer, more efficient alternative.
Lessons from Advanced Economies
Many developed nations have successfully transitioned to a predominantly cashless economy, making corruption more difficult and financial tracking more efficient.
Sweden, for instance, is leading the world in cashless transactions, with over 90% of financial dealings conducted electronically. Retailers and public institutions rarely accept cash, significantly reducing the chances of bribery and fraud.
In the United States, authorities continuously monitor the amount of cash in circulation. Instead of increasing the quantity of money, they replace old banknotes with newly designed ones, ensuring financial stability and security. This system limits the ability of criminals to hoard cash and engage in illegal activities.
Similarly, in the United Kingdom, contactless payments and online banking have become the norm, further reducing cash dependency. Every transaction leaves a trace, making it difficult for corrupt individuals to hide illicit funds.
Interestingly, Ghanaian ministers and government appointees, who insist on cash transactions locally, always use credit cards when they travel outside the country. This raises a fundamental question: if electronic payments are good enough for international transactions, why are they not mandated within Ghana?
If Ghana and other African nations adopt similar systems, corruption levels will drop significantly, and economic stability will improve.
The African Perspective
The issue of excessive cash transactions is not unique to Ghana—it is a widespread problem across the African continent. Many African governments continue to rely heavily on physical cash, making it easy for corrupt officials to siphon public funds.
Countries like Nigeria, Kenya, and South Africa have made progress in promoting digital transactions, but challenges remain.
Kenya has pioneered mobile banking with M-Pesa, allowing millions of citizens to make payments electronically. This innovation has significantly reduced the risk of corruption in some sectors.
Nigeria, despite being Africa’s largest economy, still struggles with corruption due to a cash-heavy financial system. The Nigerian government attempted a cashless policy, but resistance from certain political and business elites stalled the process.
South Africa has a well-developed banking system, but cash transactions remain prevalent in informal sectors, making tax evasion and corruption difficult to track.
To address this issue, Ghana and other African nations must take decisive action by introducing a nationwide debit and credit card system as the primary mode of financial transactions.
A Call to Action for Ghana and Africa
For Ghana to achieve financial stability, authorities must determine the exact amount of money in circulation. One effective approach is to introduce new banknotes with enhanced security features while implementing a time-bound transition period. This will force individuals hoarding cash in their homes to deposit it into the banking system, thereby promoting accountability.
Furthermore, limiting cash transactions and enforcing electronic payments for salaries, business transactions, and government expenditures will minimize corruption. For example, if board members were paid directly into their bank accounts instead of receiving cash, fraudulent financial activities would be significantly curtailed.
Beyond policy changes, addressing corruption requires a societal shift. Educational institutions, churches, and mosques must actively teach ethical conduct and expose the consequences of corruption. Unfortunately, many religious leaders turn a blind eye to corruption, despite the fact that most corrupt individuals are active members of their congregations. A troubling trend is that those engaged in corruption are often praised, while innocent individuals suffer wrongful imprisonment. A glaring example is when a sector minister involved in corrupt dealings was set free while a subordinate agency head under the same ministry was unjustly jailed.
Another major advantage of a cashless system is the facilitation of international trade. If Ghana encourages the widespread use of credit cards and Point of Sale (POS) systems, it would eliminate the need for individuals to visit forex bureaus to exchange currencies. Instead, businesses and individuals could make purchases directly from suppliers in China, the United States, and other countries from the comfort of their homes. This would enhance trade efficiency and reduce reliance on the informal currency exchange market, which is often exploited for illicit financial transactions.
Additionally, implementing a cashless system would revolutionize the import and export industry. With credit cards and digital payment solutions, customs clearance processes would be streamlined, reducing bureaucratic delays and minimizing the potential for corrupt practices at border checkpoints. Importers and exporters would benefit from faster transactions, reducing operational costs and improving overall business efficiency.
A well-regulated digital economy would also help control inflation and curb black market activities. The informal economy thrives on untraceable cash transactions, making it difficult for regulators to monitor economic activity accurately. A transition to digital payments would reduce the circulation of unregulated money, thereby stabilizing inflation and promoting economic growth.
The government must also introduce policies that incentivize digital payments. Offering tax rebates for businesses that adopt electronic payment systems, reducing transaction fees on digital platforms, and implementing stricter regulations against cash-based transactions will accelerate the transition to a cashless economy.
Additionally, electronic payments must be made mandatory for all market women and traders. The notion that digital transactions are only for the elite or corporate entities must be discarded. Market women handle billions of cedis in daily transactions, yet most still rely on cash. If electronic payment systems such as mobile money and POS devices were made compulsory in marketplaces, financial transparency would improve significantly, making it harder for illicit cash movements to thrive.
Moreover, public awareness campaigns must be launched to educate citizens on the benefits of digital transactions. Many Ghanaians, especially those in rural areas, still prefer cash due to a lack of understanding of digital banking. A nationwide financial literacy program will help bridge this gap and ensure a smooth transition.
Ghana and Africa stand at a crucial crossroads. To curb corruption and inflation, the government must take bold steps to phase out excessive cash transactions, enforce digital payment systems, and instill a culture of integrity in all sectors of society. The path to a transparent financial system is clear—will Ghana and Africa take it?
The Author, Dr. Faith Ababio-Twi is a Financial Consultant and CEO, Fab Consult – USA
