A recent decision by the The Bank of South Sudan (BOSS) to limit cash withdrawals to 10 million South Sudan Pounds (SSP) has elicited mixed reactions, as Juba moves to discourage large withdrawals and encourage cashless transactions.
- •The SSP has appreciated rapidly against the USD, but the ripple effects of a stronger economy have not been felt by the country’s citizens.
- •The apex bank is also making a push for fintech as a solution to reducing the need to carry large amounts of cash.
- •Juba’s experiment will require many factors to fall into place in quick succession, but it also offers an opportunity for banks and fintech’s to invest in growth.
“The maximum limit for cash withdrawal across all channels by public sector institutions, government spending agencies, corporates, and individuals is SSP10 million,” BOSS Governor James Alic Garang said at a press conference last Tuesday, according to reports by local media. “The public is urged to join the banking system by opening bank accounts to facilitate their receipts and payments or promote digitalization of financial services.”
Last week, Juba begun encouraging civil servants to accept their salaries electronically. Government employees have been protesting the government’s inability to settle salary arrears, as Juba struggles with corruption and a dip in oil production.
The apex bank is also making a push for fintech as a solution to reducing the need to carry large amounts of cash.
The Long View
Economists and critics of the new policy have pointed out that South Sudan’s economy is still largely informal, and so most of the cash in circulation is outside the formal banking system. Changing how people move money has both technical and psychological facets, and BSS has said it will encourage growth in the formal banking system.
The BSS Governor all urged banks to make it easy for people to open bank accounts. BSS has said that it is also strengthening its enforcement of Know Your Customer (KYC) and anti-money laundering rules in the formal banking sector. This solves many of the technical bits, although there are also other issues with the country’s banking laws, political stability, and handling of oil revenues.
“Commercial banks and mobile money operators should collaborate and ensure interoperability and modalities that allow customers to move funds between their bank accounts and mobile money accounts seamlessly,” Garang said in the statement on September 17th.
Commercial bank penetration in the country was around 1.45 commercial bank branches per 100,000 adults, according to a 2020 report by the World Bank. There are other challenges to formal banking, including literacy, low mobile phone penetration.
Many things will need to fall into place for Juba’s plan to work.
