KAMPALA: A cashless economy could be the ultimate solution to endemic corruption in developing countries such as Uganda, two studies have discovered.
From multiple studies, a cashless economy is a situation in which the flow of cash within an economy is non-existent and all transactions must be through electronic channels such as direct debit, credit cards, debit cards, electronic clearing, and payment systems such as mobile money in the case of Uganda.
Extant studies that have conceptualized corruption in Uganda, have characterized it as “a grand-scale theft of public funds involving public officials at all levels of society as well as widespread political patronage systems exacerbated by foreign aid.”
And now, researchers at the Universities of Kuala Lumpur, Manipal International University, Nebraska, Southampton, and Surrey, have concluded that digital transactions have the potential to reduce high levels of corruption and that enforcing a cashless economy reduces the possibility of taking bribes while leaving every transaction digitally recorded.
“Our findings have implications for curtailing corruption in developing countries,” the researchers observed.
A report by the World Economic Forum titled ‘The benefits of a cashless society,’ published in 2020, echoed the same sentiments as those of the researchers:
“If everyone were connected to an end-to-end e-payment infrastructure – a cashless environment – there would be transparency in money flows. Whether it’s international aid or private investment, if everyone in the chain were connected digitally, you could see where the money went and how it was spent. Any sums appearing outside of that framework could immediately be flagged and investigated. This would narrow the focus for law enforcement and forensic accountants, making it easier to target and recoup hidden money.”
Why Uganda needs to go this way
To tackle endemic corruption, the Ugandan government has passed a variety of laws, including the Inspectorate of Government Act (2002), the Leadership Code Act (2002), the Public Finance and Accountability Act (2003), the Public Procurement and Disposal of Public Assets Act (2003), the Access to Information Act (2005), the Audit Act (2008), the Anti-Corruption Act (2009) and the Whistle Blowers Protection Act (2010).
Frustrated with their failure to effectively tackle the problem, President Yoweri Museveni, acting under Article 99 (4) of the Constitution, decided to establish the State House Anti-Corruption Unit (ACU) on 10th December 2018 to coordinate citizens’ corruption complaints to the presidency.
Since 2018, the unit has received 320,000 complaints and queries from the public of these, 30,507 have been categorized as actionable complaints, 28,399 of which have been handled and closed. Despite the unit having had 2,108 accused persons in court so far, only Shs 32 billion recoveries and the problem simply doesn’t seem to ebb.
“The extent of graft especially in local government where hardly a week passes without the unit arresting local leaders involved in misappropriation of the Parish Development Model funds, for instance, is beyond measure,” says a top government official who did not want to be named.
A tool to fight corruption
“Cashless technologies could be some of our greatest assets in the fight against corruption and organized crime, too,” says the World Economic Forum report.
In their study titled “The future of corruption in the era of cashless society,” the researchers at the University of Kuala Lumpur in Malaysia and Manipal International University in India, aimed to understand the role of a cashless society in eradicating corruption through the elimination of cash usage in transactions.
Using a wide range of literature reviews and conference papers, they concluded that battling corruption by enforcing a cashless society, can be a sophisticated method to reduce the possibility of taking bribes since everything will be recorded.
From these reviews, the researchers discovered that using electronic payments will create an auditable track of payments which can inspire transparency and accountability.
“Applying the cashless economy has a high impact in improving the economy and society by reducing the inflation and creating a corrupt-free society,” they observed.
In a related 2021 study by researchers at the universities of Nebraska, Southampton, and Surrey, the relationship between digital payment and corruption in 111 developing countries was established, confirming their hypothesis that there is a negative relationship between digital payment and corruption
Their ground-breaking study titled “Do Digital Payment Transactions Reduce Corruption? Evidence from Developing Countries,” used global panel datasets of digital payments and Transparency International’s Corruption Perception Index (CPI) to explore the relationship between digital payment transactions and corruption.
“Our results, based on a fixed-effects analysis, show that digital transactions reduce corruption,” they observed.
While cautioning that the results of the study should be interpreted within the context of developing countries, the researchers observe that digital payments (implying a cashless economy) are a viable tool to reduce corruption in developing countries.
“If developing countries become cashless economies with high levels of digital payments, there is a high likelihood that corruption will reduce. However, for this to materialize, developing countries must address socio-technical issues such as limited digital payment infrastructure, poverty, digital illiteracy, and cultural beliefs that work against the wide adoption and use of digital payment. At the moment, cash remains “king” in many developing countries despite digital payment efforts as people mainly use the digital payment to send money to others, or to pay for certain products and services,” they concluded.
And although the World Bank observed in 2018 that corruption remains a challenge to ending severe poverty and disproportionate ownership of resources in developing countries, the researchers posit a robust remedy:
“Should digital payments become the modus operandi in developing countries, previously unaffordable critical products and services might become more accessible to the poor and that and government revenue could increase as a result of blocking corruption loopholes.”
Currently, some of the top countries in the world which have embarked on the journey to a complete cash-less society by the year 2030 are; Sweden, China, Norway, the Netherlands, Finland, and the United Kingdom. Their record on corruption, according to Transparency International’s Corruption Perception Index, is impressive.
Sources:
1. https://www.weforum.org/agenda/2020/01/benefits-cashless-society-mobile-payments
2. Tangri, Roger; Mwenda, Andrew M. (2008-04-01). “Elite Corruption and Politics in Uganda”. Commonwealth & Comparative Politics. 46 (2): 177–194. doi:10.1080/14662040802005336. ISSN 1466-2043. S2CID 154009485.
He Is A Longtime Journalist In Uganda Who Has Served As A Cab Reporter And Later On As Bureau Chief At Daily Monitor Newspaper From 1999 To 2001. In June 2001, He Co-Founded Uganda’s First English Tabloid Newspaper, Red Pepper Where He Has Served In Various Capacities From Managing Editor To Advertising Director, Ending His Career As Marketing And Digital Media Director In 2020.
A Holder Of A Master Of Science In Marketing From Salford University And Currently A Ph.D. Fellow In Journalism And Communication At Makerere University, Rugyendo Is A Desmond Tutu Fellow, Crans Montana New Leader, And Chairman Of Young Engineers Uganda And Uganda Premier League.
