MasterCard, the leading technology company in the global payments industry, today unveiled the results of a study, “Evaluating the Social Cost of Cash”, that demonstrates how the use of cash in Jamaica and Trinidad and Tobago slows economic growth because it stimulates informality, increases corruption and limits financial inclusion.
The results of the study shows that Trinidad and Tobago’s economy can grow by 3.5% if the country increased electronic payments by 30% in a four year period, while Jamaica’s can grow by 0.7%. The study further shows that while in the past cash was an engine for economic development, it now generates direct and indirect costs that limit its ability as an engine of progress.
- Cash has been an economic development facilitator throughout history, but in today’s society it generates a number of indirect costs:
- A cost associated with tax evasion
- The cost related to a financial exclusion which, especially for emerging economies, is feeding economic disparity and difficult economic growth.
- Economic well being and growth appear to be fueled by the ability to make electronic payments and the ease of safekeeping monetary value (especially for micro and small businesses).
- Hence, cash seems to be a factor that inhibits growth.
- For this reason, several governments are looking to address the challenges of financial inclusion and increase tax collection with several initiatives, most of which are leveraging electronic payments.