Published On: Wed, Nov 12th, 2014

Leading or lagging

Jacob Gelt DekkerNigeria, a West African country with a population of 173.6 million people and rich in minerals and oil, decided to eliminate cash by 2020. Banknotes and coins are not only very expensive but also most cumbersome. Herewith some of the government ‘s official arguments.

1. High cost of cash: There is a high cost of cash along the value chain - from the Central Bank & the banks, to corporations and traders; everyone bears the high costs associated with volume cash handling. 2. High risk of using cash: Cash encourages robberies and other cash-related crimes. It also can lead to financial loss in the case of fire and flooding incidents. 3. High subsidy: Central Bank analysis showed that only 10percent of daily banking transactions are above $ 150, but the 10percent account for majority of the high value transactions. This suggests that the entire banking population subsidizes the costs that the tiny minority 10percent incur in terms of high cash usage. 4. Informal Economy: High cash usage results in a lot of money outside the formal economy, thus limiting the effectiveness of monetary policy in managing inflation and encouraging economic growth. 5. Inefficiency & Corruption: High cash usage enables corruption, leakages and money laundering, amongst other cash-related fraudulent activities.

The little autonomous Caribbean State of Curacao has about 150,000 inhabitants and faces exactly the same money problems as Nigeria.

Ad. 1. The cost of cash on the island is about US $ 40 million per year, in transaction fees, ATM terminals, cash production, collection and redistribution, transport, security etc..

Ad 2. Year after year, Curacao suffers also from about 500-700 armed robberies for cash per year.

Ad.3 Most ATM-transactions are small and pay for the 10% of largest cash transports and transfers.

Ad.4 The entire shadow economy is based on cash. Crime thrives on cash. Last week, a national conference was called to discuss fighting crime. Eliminating cash was not on the agenda.

Ad.5. Corruption, crime and money laundering is mostly based on cash. If a society seriously wants to fight corruption and crime, it should eliminate cash immediately.

The switch to PIN-based debit and credit cards for all can be done easily within 3-6 months, and at a fraction of the cost of the present paper cash and coin system. With only about 1.000 retail outlets on the island, installation with PIN-terminals is cheap, fast and easy. It would be a boost to the economy and a blow to crime.

If a 173-million people country in Africa, like Nigeria, can do it, I am sure 150,000 people of Curacao can.

Is the government going to be the leader in the Caribbean or will the lag behind again?

By Jacob Gelt Dekker - Opinion columnist for Curaçao Chronicle

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