You may wonder why many resource-rich countries suffering illiquidity remain poor… Illiquidity magnifies the problems of an underdeveloped community.
Mankind has always searched for the most convenient means by which to pay for goods and services. Money has always only been an instrument of payment, not a source of happiness per se, unless you are Uncle Scrooge who derives satisfaction from merely holding cash, and perhaps shiny gold.
Money has continually evolved as an instrument, with the focus on making it as convenient as possible to support transactions. In my lifetime at least, the instrument of money has evolved from metals and paper to card and now to mobile and digital. What are always important characteristics are its widespread acceptability and trust as an instrument and store of (stable) value. Money has always been key in promoting economic development, as it facilitates the transfer of goods and services across individuals. The easier individuals can access cash, the more liquid the economy becomes. And the easier it is to transfer goods and services, the more convenient life becomes. A true virtuous cycle of development.
Anything that hinders the availability of cash contributes to illiquidity, and stifles economic activity. Transactions become cumbersome, expensive, and risky. It can become a vicious cycle leading to poverty, and that is exactly what we observe in many underdeveloped even if resource rich countries.
The fact that paper money still needs to be physically transferred to the hands of individuals to far flung areas creates the first big issue. It costs money to get physical money to support simple, everyday transactions. People in this situation would be willing to discount the price of the product to avoid costly and inconvenient travel. There is in addition, the risk of losing that money to robbery on the way back even before any transaction is made. Another practical solution is to find the person to barter with. That’s like taking us back to pre-medieval times
That scenario does not need to happen in this day and age. Digitising cash is a technology that is available to allow the far flung villages to be financially included. It takes commitment to reach out to these group of people; partnerships of businesses, government and NGOs can accelerate this process. Every delay in the implementation set backs the development of the communities, which naturally means the delay in the overall economic development of the country.
Helping production activities within resource-rich communities has its limits in promoting improvements in the community well-being, A well-functioning financial system is necessary to support any real economic activity. Aid money will have less impact without the support of an efficient financial service, and at the very minimum, I mean providing digital cash services that enable transactions at the most convenient and cost effective way.
One of our goals at AinFin is to help make this happen!
We aim to Improve liquidity through access to financial services at reduced costs and risks. Our open exchange enables participation of individuals and communities forming a global network, benefitting everyone, towards a meaningful economic development programme. And eventually, helping solve the persistent problem of being resource rich but still without money.