Africa’s dependence on cash is imposing a multibillion-dollar drag on economic growth despite the continent becoming the world’s largest mobile money market, according to a new report by Affinity Africa in collaboration with the Mo Ibrahim Foundation and Yale International Leadership Center.
The report argues that Africa’s cash economy is no longer a technology problem. Rather, it is an incentive problem that continues to undermine access to credit, increase remittance costs, constrain tax revenues and slow economic formalisation across the continent.
Researchers found that Africa processed 74 percent of global mobile money transaction volume in 2024, representing $1.1 trillion in value across 1.1 billion accounts. Yet despite that scale, more than 90 percent of mobile money funds are withdrawn almost immediately after receipt, highlighting the limited use of digital money beyond transfers.
“The gap between the financial infrastructure Africa has built and the economic behaviour it was supposed to change is vast. The problem is incentives. Digital payments do not yet outperform cash where it actually matters,” said Tarek Mouganie, founder and chief executive of Affinity Africa.
$330bn SME financing gap
The report identifies cash dependency as a significant contributor to Africa’s persistent financing challenges.
Small and Medium Enterprises (SMEs), which account for roughly 80 percent of employment across the continent, remain heavily cash-based and receive less than 5 percent of total bank credit, contributing to an estimated $330 billion financing gap.
Without digital transaction histories, many businesses remain invisible to formal lenders, limiting their ability to access working capital and expand operations.
The report argues that widespread digitisation of payments could create verifiable financial records that improve credit underwriting and unlock lending to millions of underserved businesses.
Remittance costs drain households
Researchers also highlighted the burden of high remittance fees on African households.
Average remittance costs remain around 8.7 percent, nearly three times the United Nations Sustainable Development Goal target of 3 percent, resulting in an estimated $8 billion annual loss to families receiving cross-border transfers.
Another major concern is the scale of Africa’s informal economy.
According to the report, 85 percent of African workers remain outside the formal sector, limiting governments’ ability to broaden the tax base and mobilise domestic revenue for infrastructure, healthcare and education.
Emma Sky, founding director of Yale’s International Leadership Center, said these challenges should not be viewed as permanent characteristics of African economies.
“The SME financing gap, the annual remittance tax, the number of workers outside the formal economy — these are not inevitable features of the continent,” she said.
The report proposes a sequential reform agenda designed to reduce cash dependency and increase digital payment adoption.
The first recommendation is to make digital payments cheaper than cash for merchants through caps on merchant fees, targeted subsidies for small businesses and mandatory acceptance of digital payments for government services.
The second is to require interoperability between payment platforms, including real-time settlements and cross-border connectivity across regional economic blocs.
The final step is to create stronger incentives for consumers and businesses to remain within the digital financial system by expanding access to savings, credit and insurance products linked to digital transaction histories.
The report also calls for greater coordination among governments, regulators, banks, development finance institutions and investors.
Mo Ibrahim, founder and chair of the Mo Ibrahim Foundation, warned that incremental reforms may not be sufficient to meet Africa’s economic ambitions.
“Incremental reform will not be enough.The public sector must move faster in building the regulatory clarity, institutional coordination and governance frameworks capable of supporting Africa’s next phase of economic transformation,” he said.
