Even though we’re all excited about mobile money these days, it’s useful to be reminded that cash still matters. A recent evaluation study in Kenya run by Innovations for Poverty Action found that:
in Kenya the average firm loses an estimated 5 to 8 percent in profits from a combination of sales lost because of not having change and sales lost while searching for change.
That’s really quite a big deal for a small business. And it’s not just small businesses – the study reminded me of something I saw some years ago in Cabo Delgado, the far north of Mozambique. It was cotton harvest time and the company, a joint venture between Lonrho and the Mozambican government, that was buying the cotton from the farmers needed to get it all bought and paid for. But there wasn’t enough actual cash in all the banks in the province for them to pay the farmers what they were owed. In the end the company had to go to the Asian businessmen who ran much of the economic activity in the province (this was in the days before the Chinese came), and beg for a loan to tide them over while they flew banknotes up from Maputo.
A reminder that MPESA and the like won’t save the world – we’ll still be needing real money for a while longer….
