By Sami Zaptia.
London, 17 August 2020:
Several shopping malls were closed last week by the Interior Ministry in Benghazi because they refused to take payments electronically from customers, state news agency LANA reported Thursday.
While commending many other malls and shops for continuing to take payment electronically, the eastern-based Interior Ministry warned those who have refused to do so at a time of a cash shortage in Libya as a whole and in eastern Libya particularly. The Ministry says that there is ‘‘no justification’’ for refusing e-payments.
In a circular sent to commercial entities, the Interior Ministry said that the difficult situation Libyan citizens are currently suffering has led to terrible living conditions which has burdened them with the difficulty of obtaining cash because of the inability of banks to provide it. It added that the introduction of Point-of-Sale (POS) banking was introduced to enable citizens to buy their basic needs (without having cash). However, it noted that with the increase in the exchange rate of the US dollar in the black-market, many traders stooped accepting e-payments, blaming the banks for ceasing the service. This has exacerbated the cash crisis and squeezed citizens further.
The Interior Ministry called for the continued use of e-payments by commercial entities in view of the country’s current emergency cash crisis and warned that necessary legal measures will be taken against violators. It called on citizens to report commercial concerns refusing e-payments through the Ministry’s Facebook page or via its email.
It will be recalled that Libya continues to go through a banking cash crisis. As its political crisis has continued, the public has lost confidence in the governments, economy, and banking system. They have manifested this by choosing to hoard their money at home, rather than depositing them in their bank accounts. This has caused a cash crisis.
The government has moved to encourage the use of e-banking services. These have grown and spread over the last three years; however, e-payments have also created a dual system. At the peak of the crisis, cheque payments were attracting a 40 percent surcharge. Much of Libya’s economy is conducted in the informal cash sector. Cash is still king, and eventually a supplier down the chain needs cash – which banks don’t have.
They had informed Libya Herald that this was the premium they themselves had to pay middlemen or corrupt bank employees in order to gain access to cash in their own bank accounts.
Much of Libya’s economy is conducted in the informal cash sector. Cash is still king, and eventually a supplier down the chain needs cash – which banks don’t have or have little of. With high demand and low supply for cash, some bank employees have taken advantage of this by charging a premium for giving some customers their own cash
And as noted earlier, many small businesses and individual traders in Libya are not registered entities – operating in the black market, and therefore have, or prefer not to have, a bank account or debit card.
The banking sector in Libya, with its 42-year Qaddafi-era centralized welfare state legacy, is quite archaic and is in need of deep reform to bring it on a level with its peers in say Tunisia or Egypt. Banking laws need total updating and the CBL’s grip on the private banking sector needs to be reviewed in order to allow the private sector to flourish and lead economic innovation and growth in the country.