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Kenya recognized for her Leadership in use of Mobile Money in Public Finance

Sanjeev Gupta of Centennial Group; Michael Keen of International Monetary Fund; Alpa Shah – Economist at IMF and Genevieve Verdier – the Deputy Division Chief at the IMF have collectively penned a high quality research paper on voxeu website on innovative technologies in the field of public finance. Below is the extract specifically on Kenya.

Kenya has pioneered the adoption of mobile payments technology. The M-Pesa system, launched in 2007, can be used to pay taxes and for government services. This has reduced interactions between taxpayers and tax officers, and so restricts opportunities for corruption. –

The writers also believe that there is hope in the potential of using blockchain technology to make better designs and subsequently manage public finances.

The researchers makes the following powerful conclusion:

Each country’s path to digitalisation depends on its circumstances. While most advanced economies are choosing incremental approaches, developing countries have the potential to leapfrog to newer and more sophisticated policy formulation, design, and implementation. All countries, however, must act if they are to exploit the benefits and avoid the pitfalls. Technology heightens the importance of strong fiscal, political, and governance institutions.-

It’s encouraging to learn from this research paper that our governments can get better outcomes from adoption of new technologies and secondly the fact that developing countries can leadfrog direct to new and better technologies out there.

Limits in use of digital technologies in public finance:

  1. Technology is not a substitute for doing the right thing
  2. Human, political and institutional capacity barriers have an effect of slowing down government innovation as well as adoption of advanced technology.
  3. Corrupt government officials and taxpayers may find a way of compromising the digital systems to work in their favor.
  4. Concerns of fraud, internet security and privacy are also common. For instance some countries in Europe gave experienced fraudulent VAT refund claims.
  5. Advances in both robotics and artificial intelligence has created fears of increasing unemployment rates as well as huge inequality gaps. A number of experts have recommended that those robots to be deployed in production should be taxed the same way humans are taxed by government. Equally universal basic income is gaining currency among economic and financial experts.

Read the complete article here.

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