1.1 Introduction
The CBN cashless policy refers to a set of regulatory measures introduced by the Central Bank of Nigeria aimed at reducing reliance on physical cash by promoting electronic transactions and digital payment systems. The Central Bank of Nigeria (CBN) introduced the cashless policy to promote financial inclusion, enhance transaction efficiency, and curb the proliferation of cash-related crimes (CBN, 2012). This policy aimed to shift transactions from physical cash to electronic forms, thereby integrating more businesses and individuals into the formal financial system.
In urban areas, the policy's effectiveness has been widely recognized; however, its impact on rural business development remains less explored. Rural areas in Nigeria face unique challenges that impact the implementation of cashless transactions, including limited access to digital infrastructure, lower levels of financial literacy, and insufficient internet connectivity (Ibrahim & Raji, 2018).
The effectiveness of the CBN cashless policy in rural settings is critical for evaluating its impact on business operations, economic growth, and overall financial inclusion. Studies have shown that while cashless policies can boost efficiency and transparency in financial transactions, they also present challenges, such as technological barriers and resistance to change among rural populations (Adewale et al., 2019).
As a prelude to other parts of this study, this chapter will discuss the background upon which this study was initiated, the statement of problems that led to this study, the Aim and Objectives of the study. Others are Significance of the study, Scope of work, Research hypothesis and questions, Limitation of the study and Definition of terms.
1.2 Background of Study
The Central Bank of Nigeria (CBN) introduced the cashless policy in 2012 as part of its broader strategy to modernize the Nigerian financial system and reduce the reliance on physical cash. This policy aimed to shift transactions from cash to electronic forms to enhance financial inclusion, reduce the cost of banking services, and mitigate the risks associated with cash handling (CBN, 2012). Initially implemented in major urban centers, the policy's expansion to rural areas was intended to integrate less accessible regions into the formal financial system.
Adewale et al. (2019) asserted that, in its early stages, the cashless policy faced significant challenges in urban areas, including resistance from businesses and consumers accustomed to cash transactions (Adewale et al., 2019). Despite these challenges, the policy showed promise in reducing cash-related crimes and improving transaction efficiency in cities. The success in urban areas led to a gradual expansion of the policy to rural regions, which presented additional difficulties due to the lower levels of digital infrastructure and financial literacy.
According to Ibrahim & Raji (2018), rural areas in Nigeria have traditionally relied on cash transactions due to limited access to banking services and technological barriers. As a result, the implementation of the cashless policy in these regions encountered obstacles such as inadequate internet connectivity, low adoption rates of digital payment systems, and a lack of awareness among rural business owners (Ibrahim & Raji, 2018). The CBN's efforts to address these challenges included the introduction of mobile banking solutions and financial literacy programs aimed at increasing the adoption of electronic payments in rural communities.
Over time, the effectiveness of the cashless policy in promoting rural business development has been mixed. While there have been successes in enhancing financial inclusion and streamlining transactions for some rural businesses, many others continue to face difficulties related to technological limitations and infrastructural deficiencies. The ongoing assessment of the policy's impact in rural areas is crucial for refining its implementation and addressing the specific needs of these communities.
The Central Bank of Nigeria (CBN) launched the cashless policy in 2012 with the aim of transforming Nigeria’s financial system by reducing reliance on physical cash and encouraging electronic transactions (CBN, 2012). This policy was primarily targeted at urban centers where the infrastructure for digital transactions was already established. However, the extension of this policy to rural areas, where the financial ecosystem is less developed, presented unique challenges and opportunities.
In rural Nigeria, the adoption of cashless transactions has been hindered by several factors. These include limited access to digital payment infrastructure, low levels of financial literacy, and inadequate internet connectivity (Ibrahim & Raji, 2018). Many rural businesses operate in environments where cash transactions are deeply ingrained, and the transition to electronic payment systems can be both challenging and slow. Despite these hurdles, the policy aims to integrate rural areas into the formal financial system, improve financial inclusion, and foster economic development.
The effectiveness of the cashless policy in rural areas has been mixed. On one hand, it has the potential to enhance financial transparency and reduce the risk of cash-related crimes. On the other hand, the practical challenges faced by rural businesses, such as sporadic internet access and resistance to technological change, have limited the policy's success (Adewale et al., 2019). Additionally, the cost of implementing and maintaining digital payment systems can be prohibitive for small rural enterprises.
Therefore, in Nigeria where the research was carried out, the activities that was conducted is to assess the effectiveness of the CBN cashless policy specifically in the context of rural business development.
1.3 Statement of Problems
Investigation revealed that the effectiveness of the Central Bank of Nigeria (CBN) cashless policy in rural business development has been hindered by several critical issues. One major problem is the limited access to digital infrastructure in rural areas, which significantly impedes the adoption of cashless transactions (Ibrahim & Raji, 2018). Many rural regions suffer from inadequate internet connectivity and a lack of technological resources, which affects the ability of businesses to engage in electronic payments. Additionally, there is a notable gap in financial literacy among rural business owners, who often lack the knowledge and skills necessary to effectively use digital payment systems (Adewale et al., 2019). This lack of awareness and understanding contributes to the resistance against adopting cashless methods and perpetuates reliance on cash transactions.
Another issue is the financial and logistical challenges faced by rural businesses in implementing cashless solutions. The cost of acquiring and maintaining electronic payment systems can be prohibitive for small businesses operating on limited budgets. Furthermore, the integration of such systems into existing business processes can be complex and resource-intensive (CBN, 2012).
The policy also encounters resistance due to entrenched cultural practices and skepticism towards new financial technologies, which can slow down the adoption process and limit the policy's impact (Adewale et al., 2019). These challenges collectively undermine the effectiveness of the cashless policy in fostering rural business development and achieving broader financial inclusion goals.
1.4 Aim and Objectives of Study
The aim of the study is to evaluate the effectiveness and challenges of the cbn cashless policy on rural business development. In achieving this aim, the following specific objectives were laid out as follows:
- To evaluate the level of financial literacy and technological readiness among rural business owners with respect to the cashless policy;
- To explore the extent to which the cashless policy has influenced financial inclusion and business efficiency in rural areas;
- To identify the key challenges that rural businesses encounter in adopting and utilizing cashless transaction methods;
- To assess the impact of the CBN cashless policy on the financial operations and growth of rural businesses; and
- To provide recommendations for improving the implementation of the cashless policy and enhancing its effectiveness in rural business development.
1.5 Research Questions
The study came up with research questions so as to be able to ascertain the above stated objectives. The specific research questions for the study are stated below as follows:
- What is the impact of the CBN cashless policy on the financial operations and growth of rural businesses?
- What are the primary challenges that rural businesses face in adopting and utilizing cashless transaction methods?
- To what extent do financial literacy and technological readiness among rural business owners affect the implementation of the cashless policy?
- How has the cashless policy influenced financial inclusion and business efficiency in rural areas?
- What improvements can be made to the implementation of the cashless policy to better support rural business development?
1.6 Research Hypothesis
In order to pursue the objective of this study, the following generalized statements have been designed to guide and aids in obtaining the result for the experiment to be conducted. For this work, the null hypothesis will be represented with H0 while the alternative hypothesis will be represented with hypothesis H1.
Hypothesis One
- H0: The CBN cashless policy has no significant impact on the financial operations and growth of rural businesses.
- H1: The CBN cashless policy has a significant impact on the financial operations and growth of rural businesses.
Hypothesis Two
- H0: Rural businesses do not face significant challenges in adopting and utilizing cashless transaction methods.
- H1: Rural businesses face significant challenges in adopting and utilizing cashless transaction methods.
Hypothesis Three
- H0: Financial literacy and technological readiness among rural business owners do not significantly affect the implementation of the cashless policy.
- H1: Financial literacy and technological readiness among rural business owners significantly affect the implementation of the cashless policy.
Hypothesis Four
- H0: The cashless policy does not significantly influence financial inclusion and business efficiency in rural areas.
- H1: The cashless policy significantly influences financial inclusion and business efficiency in rural areas.
Hypothesis Five
- H0: There are no significant improvements needed in the implementation of the cashless policy to better support rural business development.
- H1: Significant improvements are needed in the implementation of the cashless policy to better support rural business development.
1.7 Significance of Study
The outcome realized from the research findings will be significant to the following stakeholders:
- The findings from this study will provide valuable insights for policymakers, helping to refine and enhance the implementation of the CBN cashless policy to better address the needs of rural businesses.
- Business owners in rural areas will benefit from a clearer understanding of the policy's impact on their operations and the specific challenges they face.
- Financial institutions will gain knowledge on how to tailor their services to improve adoption rates and support rural businesses more effectively.
- Researchers and academics will have access to updated data and analysis that can inform future studies on financial inclusion and policy implementation.
- Finally, the general public will benefit from improved financial systems and practices, which can contribute to overall economic development and stability in rural communities.
1.8 Scope of Study
The scope of the research is focused on the effectiveness and challenges of the CBN cashless policy on rural business development using Zenith Bank Plc Abuja as a case study.
1.9 Limitations of the study
During the course of this study, there were some problems encountered which stood as limitations to the research work. Some of the limitations include:
- Insufficient data was a significant issue, as there was a lack of comprehensive and reliable information on the implementation and impact of the CBN cashless policy in rural areas.
- Frequent power failures disrupted data collection and affected the consistency of the research process.
- Delays from respondents in providing necessary information further hindered the timely completion of the study.
- Additionally, financial constraints restricted the scope of the research, limiting the extent of data collection and analysis. Time constraints also impacted the depth of the study, as the research had to be conducted within a limited timeframe, affecting the thoroughness of the investigation.
1.10 Definition of Terms
Cashless Policy:
The CBN cashless policy refers to a set of regulatory measures introduced by the Central Bank of Nigeria aimed at reducing reliance on physical cash by promoting electronic transactions and digital payment systems (CBN, 2012). This policy seeks to enhance the efficiency of financial transactions and increase financial inclusion.
Rural Business Development:
Rural business development involves the growth and advancement of businesses located in rural areas. It encompasses efforts to improve business operations, increase profitability, and support economic development in less urbanized regions (Ibrahim & Raji, 2018).
Financial Inclusion:
Financial inclusion is the process of ensuring that individuals and businesses, particularly those in underserved or rural areas, have access to useful and affordable financial products and services (World Bank, 2014). It aims to integrate more people into the formal financial system.
Digital Payment Systems:
Digital payment systems are electronic methods used for conducting financial transactions, including online banking, mobile payments, and electronic funds transfers. These systems are designed to facilitate cashless transactions and improve the efficiency of financial operations (Adewale et al., 2019).
Financial Literacy:
Financial literacy refers to the knowledge and skills required to make informed financial decisions and effectively manage financial resources. It includes understanding financial products, budgeting, and using digital financial tools (Lusardi & Mitchell, 2014).
