Cash remains king in local economy
Lewanika Timothy | Monday March 3, 2025 09:51
The latest data is contained in a Bank of Botswana (BoB) research paper released recently.
Financial data extrapolated from 2011 as a base year shows that Batswana prefer to use cash as a means of transacting goods and services, with the local economy noticing a growing surge in the use of cash, whilst also seeing growth in its other payment forms such as Electronic Funds Transfer (EFT).
“Cash demand, as measured by cash in circulation, increased by 110% from P2 billion in 2011 to P4.2 billion in 2023,” the BoB said in its report. “The demand was driven by the highest banknote denomination (P200), implying that cash was mostly used for the store of value or precautionary purpose.”
The researchers also noted that the highly held denomination of currency was P200 which reflected the inflationary movement of prices that eroded the purchasing power of money. This means the value of other lower denominations such as P50 or P100 has been eroded by inflation forcing local consumers to hold on to larger notes.
“Therefore, the bulk of banknote denomination demanded was the P200 banknote, implying that cash was used more as a store of value. This could be attributed to the increasing inflation rate and declining interest rates during the period,” researchers noted.
The use of cash is a double-edged source for any economy, as cash has been found to be a prime pedigree for financial crimes such as money laundering. Cash is the preferred payment method for illicit financial activities, which include money laundering, as it bypasses checks and balances at institutions such as banks and is more difficult to trace for authorities.
The Financial Intelligence Authority (FIA) shared a report in 2023 showing that cash transaction reports – or reports of transactions involving amounts of P10,000 and above – jumped to P61.7 billion in 2022–2023, from P25.5 billion in the prior year.
Whilst the majority of cash transaction reports notified to the FIA in 2022–2023 came from banks, other entities reporting included car dealerships, insurance brokers, and attorneys, amongst others.
Car dealerships are proving a headache to the FIA, which previously found that about P65 million was pilfered by criminals through various tricks in the industry between 2017 and 2021. Part of these funds were then cleaned through the same industry.
EFTs remain the dominant means of payment as shown by the proportion to total payments at 53% in 2023. The dominance of EFTs, however, has declined since 2017, possibly because of the introduction of mobile money services which target mostly the underbanked and unbanked population, the BoB found.
During the same period, cash and cards were increasingly being used by consumers. This may be because consumers were weighing the costs of using EFTs against their convenience, especially for low-value transactions.