Understanding Cash Dominance in Tunisia’s Payment Landscape
Cash remains the predominant form of payment in Tunisia, a situation shaped by a combination of historical, cultural, and economic factors. Despite some progress in developing electronic payment systems, cash is still deeply entrenched in the daily lives of Tunisians. Here’s an overview of the key factors contributing to this phenomenon:
1. Limited Banking Penetration
One of the primary reasons for cash dominance in Tunisia is the limited reach of banking services. As of the latest data, only about 37% of Tunisian adults have access to a bank account. This low level of financial inclusion means that a significant portion of the population relies on cash for daily transactions. Rural areas are especially underserved by banks, making cash the most accessible and reliable means of payment.
2. Cultural Preferences
In Tunisia, as in many Arab countries, there is a strong cultural preference for cash. This preference is partially rooted in Islamic financial principles that traditionally favor tangible assets over other forms of wealth. Additionally, there is a deep-seated distrust of financial institutions among some segments of the population. This skepticism is often based on historical economic instabilities and concerns about corruption within the banking sector.
3. The Informal Economy
Tunisia’s informal economy is a substantial contributor to its GDP, accounting for an estimated 40-50%. This large shadow economy, which includes sectors like agriculture, small-scale manufacturing, and various services, operates predominantly on cash. By relying on cash transactions, participants in the informal economy can avoid taxes and regulatory scrutiny, further reinforcing cash’s role.
4. Infrastructure Limitations
While Tunisia has made strides in developing its electronic payment infrastructure, it still lags behind more developed nations. For instance, Tunisia has only about 17 ATMs per 100,000 adults, compared to over 100 in many European countries. Moreover, the availability of point-of-sale (POS) terminals is limited, particularly outside of major cities, making electronic payments less accessible.
5. Security Concerns
Cybersecurity issues have also contributed to the continued reliance on cash. Tunisia has experienced several high-profile cyberattacks in recent years, targeting both public and private sectors. These incidents have heightened concerns about the safety of electronic payments, leading many Tunisians to view cash as a more secure option.
6. Lack of Financial Literacy
Despite a relatively high overall literacy rate, financial literacy in Tunisia remains low. Many Tunisians lack a basic understanding of financial concepts, making them less likely to adopt new payment technologies. Although there have been efforts by the government and NGOs to improve financial education, the impact has been limited so far.
7. Regulatory Environment
Tunisia’s regulatory framework for fintech and electronic payments is still evolving. The central bank, Banque Centrale de Tunisie, has taken a cautious approach to new financial technologies, which has slowed their adoption. While there are ongoing efforts to modernize financial regulations, the current environment does not fully support a rapid transition to digital payments.
8. Economic Factors
Tunisia has faced significant economic challenges since the 2011 revolution, including high inflation and unemployment. For many Tunisians, economic instability has reinforced the preference for holding physical cash rather than keeping money in banks or using electronic payment methods. Cash is perceived as a safer and more reliable store of value in uncertain times.
9. Remittances
Remittances from the Tunisian diaspora are a significant source of income for many households. While there have been efforts to route these funds through formal banking channels, a considerable portion still arrives in cash via informal methods. This reliance on cash for remittances further solidifies its role in the economy.
10. Small Business Dominance
The Tunisian economy is dominated by small and micro-enterprises, many of which operate primarily on a cash basis. For these businesses, cash transactions are simpler and more cost-effective than electronic payments, reinforcing the preference for cash.
Recent Developments
Despite these challenges, Tunisia is making efforts to promote digital payments. The central bank has introduced a regulatory sandbox to encourage fintech innovation, and mobile money services like Ooredoo Tunisia’s MobiMoney are gaining traction. Additionally, the COVID-19 pandemic has somewhat accelerated the adoption of digital payments as contactless methods were encouraged for hygiene reasons.
However, given the deep-rooted nature of cash in Tunisia’s economy and society, the shift towards digital payments is expected to be gradual. While progress is being made, significant barriers remain, and cash is likely to remain a dominant force in Tunisia’s payment landscape for the foreseeable future.
