A Cashless Economy Could Boost the MENA Region

08.10.2020 | Mahir Sheikh

Technology and the emergence of complex capital markets are creating opportunities to expand the labor market in developing countries. This is especially the case throughout the Middle East and North Africa region, where many countries have larger than average informal economies.

The informal sector is fueled by cash transactions that allow a significant part of the economy to go unregulated and unidentified. Compounded with the global spread of COVID-19, informal economies have been less able to collect tax revenue, which in turn has slowed economic and social development. The transition to a cashless economy throughout the MENA region provides significant benefits, including the economic inclusion of underserved communities throughout the MENA region, increased overall development of the private sector and reduced rates of corruption, all while limiting interactions that could potentially increase the transmission of COVID-19.

Informal Sector

The World Bank Report  identifies informality as a complex phenomenon comprised of unpaid workers who lack social security or health insurance, small firms that operate outside the regulatory framework, and large registered firms that might partially evade corporate taxes and social security contributions. While the magnitude of informal economies is difficult to measure, countries with a lower GDP per capita are associated with a larger informal sector. Individuals who work informally expose themselves to more risk and are unable to rely on government services to ease the burden that may be associated with a recession. This is especially the case now as the worldwide pandemic has closed facilities and implemented social distancing measures, making it harder for these workers to sustain a source of income. While social distancing measures would still make it difficult to operate businesses on a day to day basis, online platforms fueled by cashless transactions have created opportunities for small businesses to create a source of income.


The MENA region has higher rates of unemployment than most other regions. This is attributable to high rates of unemployment among women and youth. According to  , in 2017 only 15% of young women were active in the labor force, and youth unemployment stood at 30%. Both those numbers that are comparatively overwhelming. The average MENA country produced one third of its GDP from the informal sector and employs  indicating that about two thirds of MENA workers do not have access to health insurance or pension plans. Given the high rates of unemployment and informal employment, the MENA region stands to benefit substantially from cashless economies.


Reduced Corruption: Corruption is a large issue within the MENA region and cash transactions make countries more vulnerable to corruption. A cashless economy would track transactions that occur between government officials and would track money that is used for specific government programs or projects. Going cashless would also combat crimes that include tax evasion, financing of terrorism, and other economic crimes. While a cashless economy would not completely eradicate corruption, it would provide more oversight that would lead to more economic stability and continuity in such a volatile region.

Expand Consumer Base: An economy that utilizes online platforms allows businesses to expand their customer base. With the use of social media platforms and other online shopping platforms, businesses would be able to possibly generate more income while limiting social interactions. On a local level, small businesses can charge delivery fees while limiting the costs associated with transportation. A cashless economy would enable businesses to function and possibly expand as the LIFE Project has done during this pandemic.

Limit the Spread of Covid-19: A cashless economy could limit the spread of dangerous infections and diseases, including COVID-19. This is especially the case in the MENA region where access to clean water is often limited and sanitation may be poor. Cash transactions create an avenue for the spread of viruses. An economy that is able to function through digital transactions stands to have a better chance to limit the spread of the virus.

Although there are many benefits to moving toward a cashless economy, especially in the MENA region, the transition would also present challenges. One includes the possibility of reduced innovation and entrepreneurship.

Despite these limitations, the benefits for a cashless economy remain significant given the circumstances and challenges that COVID-19 has presented. In order to promote economic development, there must be a mechanism or platforms in place to allow businesses to remain open and provide goods and services for their communities while simultaneously limiting the spread of COVID-19. Possible utilization of crypto-currency or increased access to financial services for countries in the MENA region could go a long way to make the transition possible. As the world shifts to a new normal, MENA countries must make adjustments that continue to promote private sector development and enable economic prosperity.