Currency Replacement: A Step Toward Financial Technology and Inclusion

By Professor Ahmed Magzoub Ahmed

The use of financial technology is no longer optional or a luxury but has become a necessity and a mandatory approach. Without it, nations risk falling behind in development and leaving their economies akin to the Middle Ages.

The Central Bank of Sudan (CBoS) has taken a commendable step by issuing a circular to banks, urging them to complete missing elements of financial technology. However, a comprehensive plan from the CBoS and the Ministry of Finance is essential for implementing financial technology. The Central Bank must prepare the legislative framework and regulatory structures required to deepen financial technology programs for the banking and financial sectors. The government, led by the Ministry of Finance and the Central Bank, should digitize all administrative and financial operations and enact the necessary legislative support to ensure electronic procedures are legally binding for both parties involved. A timeline for this digital transformation plan should also be established.

This does not mean waiting for all prerequisites to be met. Legislatively, it is necessary to draft and approve laws governing the performance of companies and institutions offering financial services and create regulations for parties adopting electronic payments for transactions, whether for government dues or private sector payments. This will replace paper-based transactions that rely on formal and substantive criteria.

The government’s efforts in financial technology have so far been limited to electronic revenue collection via Form 15, a system that has seen little advancement for over a decade, except for the customs administration’s electronic windows and individual efforts by other institutions.

For banks, their efforts remain limited to credit cards, which primarily operate within their own ATM networks or enable card-to-card transfers. Payment transactions with merchants are confined to those with Point of Sale (POS) terminals, while electronic fund transfers are restricted to intra-bank accounts. For instance, despite the Bank of Khartoum’s leadership in financial technology, its services are limited to transfers within its own accounts.

The Sudanese Banks Union’s initiative to establish a system enabling inter-bank transfers is a promising step. The CBoS should support this initiative, mandating and encouraging banks to join shared systems for financial transfers, as is standard practice globally.

Additionally, the Central Bank must promote the expansion of POS systems by making the devices accessible and mandating their use across all institutions. This approach is a crucial step toward financial technology expansion and inclusion, especially during currency replacement phases. For instance, individuals exchanging old banknotes should be required to deposit them into bank accounts and provided with electronic payment cards immediately.

Simultaneously, businesses in the private sector should be mandated to activate bank accounts and deploy POS devices to eliminate the need for direct cash withdrawals. This approach addresses the challenges of money transportation and transactions among importers, retailers, and consumers.

The Central Bank, in collaboration with the government, should issue legislation linking business license renewals for all commercial or service activities to meeting financial technology requirements. These include opening and maintaining bank accounts, installing POS devices, and accepting electronic payments.

Furthermore, the financial technology framework requires robust collaboration between banks, financial technology firms, and telecommunications companies to create a comprehensive system. Telecommunications play a pivotal role by providing internet infrastructure, enabling services such as mobile money. This involves creating digital wallets without requiring bank accounts, offering wide geographic coverage through agent networks in areas where banking services are unavailable.

To achieve financial inclusion and address the informal economy, which significantly undermines monetary and fiscal policies, the CBoS must enable private sector participation in establishing financial technology companies. Successful models globally have relied on partnerships between banks and specialized financial technology firms.

Despite Sudan’s advancements in telecommunications, policy and administrative challenges have hindered the full potential of these technologies, particularly mobile money solutions. A cooperative framework must be established to ensure inclusive participation while safeguarding government revenue.

The Ministry of Finance and the CBoS must focus on regulatory arrangements to delineate roles and responsibilities among economic actors. Saudi Arabia’s experience offers an exemplary model, ranking third globally in financial technology adoption. The kingdom has invested heavily in digital systems, encouraged global partnerships, and prioritized human resource development.

Critical systems required for success include:

1. Payment systems to enhance electronic payment adoption.

2. Licensing frameworks for all stakeholders.

3. Consumer protection systems for secure usage.

4. Transparency and regulatory oversight mechanisms.

Sudan should learn from and build upon these global experiences for a smoother transition.

May God guide us and grant us success.

(Source: “Al-Muhaqiq” website)