Central bank digital currencies must emphasize financial inclusion in order to prevent further inequality and drive stronger economic growth, according to the International Monetary Fund (IMF).

«We think that central bank digital currencies (CBDC) should be designed with financial inclusion in mind,» said Ratna Sahay, IMF senior advisor on gender and deputy director of monetary and capital markets, at the Global Digital Currency Forum 2021.

«Policymakers need to ensure, whatever the design, that there could be usage and acceptance by the wider sections of the population.»

Lower Inequality, Higher Growth

According to Sahay, who cited an IMF study of 130 countries, inequality «uniformly falls» across all types of economies when financial inclusion increases.  

And in a well-regulated and supervised financial system, a higher number of borrowers not only boosts economic growth but also improves economic stability. 

Inclusion Gains: Woman > Man?

While any inclusion is undoubtedly welcome, Sahay noted that there were greater economic returns from newly included females compared to newly included males across various factors including improvements in health, education or household conditions for children. 

«Our study also found that at the margin when more women have access to finance, the impact on growth is much higher,» Sahay said. 

Fintech firms have been effective in not only driving greater female adoption but also improving the gender gap, especially compared to traditional financial services, with Africa as the leading region. 

CBDC Recommendations

According to Sahay, the IMF has made a series of recommendations for policymakers exploring CBDCs including a focus on broad access, maintaining similarities and coexistence with cash, open accessibility to a wide set of providers and addressing concerns on trust, privacy, integrity, know-your-client and anti-money laundering requirements. 

The IMF also highlighted risks such as regulatory uncertainty, lacking financial and digital literacy, biases from algorithm-based credit issuance alongside faster and more intense boom-and-bust cycles due to increased velocity of money.

«The ultimate goal for any revolution in technology must benefit the wider population,» Sahay reiterated. «Country authorities must think of that before they adopt anything new.»

  • finews.asia is an official media partner of the Global Digital Currency Forum 2021.