Can CBDCs Increase Financial Inclusion?

Peterson Ozili ¹ has written a paper looking at the possible benefits of bringing the unbanked into the formal financial sector. In addition to listing the arguments for and against, he also includes a literature search outlining their key conclusions. Although he explicitly does not reach a conclusion on whether Central Bank Digital Currencies (CBDCs) will increase financial inclusion, he outlines some of the dilemmas facing central banks in the design of CBDCs balancing off achieving financial inclusion relative to other policy objectives.

Arguments for

In terms of financial inclusion, the argument for CBDCs is that they should;

• Increase access to digital financial services which should improve welfare

• Enhance the efficiency of digital payments

• Digitise the value chain by enabling businesses to access wholesale CBDCs bringing them into the digital financial system 

• Enlarge the digital economy, for example allow sectors such as real estate, energy and health to develop APIs to offer services on a real time basis

• Lower transaction costs

• Be able to be used offline when there is no internet coverage

• Reduce cash management costs