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central bank digital currency (CBDC) is not the silver bullet that will solve all the financial challenges we face today, the Governor of the Central Bank of Kenya, Dr. Patrick Njoroge, has stated. If anything, the CBDC could exacerbate some of these challenges if not handled correctly.

Speaking during a panel discussion with other banking heads at the Bank for International Settlement’s (BIS) Innovation Summit, Njoroge said that central banks must first address the challenges they face directly before launching their CBDCs.

“Let’s not look at CBDCs as the silver bullet for all the problems that we have. On the contrary, deal with the problems directly,” he said.

Njoroge pointed out that one of the challenges that central banks, including the CBK, face is financial exclusion, more so with women. Such a challenge is caused by several diverse factors, including cultural norms in which women have less access to education and even mobile phones, hindering their access to basic financial services. 

“That problem will still remain. You can’t solve it with a CBDC. And in effect, if you move into that world [of CBDCs], that problem will become much more acute,” the governor stated.

Unlike most of its peers, the CBK isn’t targeting financial inclusion through a CBDC, which is the promise most central banks have made as they develop their digital currencies. Kenya has one of the highest financial inclusion rates among its peers. The ubiquity of mobile payments via M-Pesa ensures almost every adult has access to basic financial services. 

As Njoroge revealed, Kenya has “reached diminishing returns” in promoting financial inclusion.

According to the governor, central bankers are quite concerned about two issues when considering CBDCsfinancial stability and keeping control over monetary policy. This has been why most of them have been against digital assets that they feel would infringe on these two issues.

“There has to be somebody who watches financial stability and these other wider issues of monetary policy,” Njoroge said.

The CBK published a consultation paper in February in which it called for public feedback on the introduction of a CBDC. It outlined the benefits and drawbacks of the digital shilling as well as the sectors that would be most affected.

Most recently, governor Njoroge sounded his concern that the low penetration of smartphones in Kenya could derail the CBDC rollout. The East African country has a 44% smartphone penetration, which the governor said could further widen the gap in financial inclusion if the CBK launched the digital shilling, which would only be available on 4G smartphones.

To learn more about central bank digital currencies and some of the design decisions that need to be considered when creating and launching it, read nChain’s CBDC playbook.

Watch: CoinGeek Zurich panel, Blockchain & the Future of Africa

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