Conducting business in cash in the 21st century is an outlandish oddity when the rest of the world is moving towards a cashless society. The widespread use of cash is affecting businesses in many ways including hindering expansion and precluding financing of working capital. Companies also have to address the logistical and security issues involved in handling large bulk of cash. Most small and medium sized enterprises have practically joined the informal sector, and are heavily relying on cash transactions. The cash economy also heightens risks of tax evasion and money laundering. On the bright side, electronic money transfer (EMT) providers (see page 54) are seizing the opportunity to fill some of the gap left by the banking fiasco.
Barriers to expansion
Businesses are trying to cope with the transformation of transactions into mostly cash and mitigate the consequences. A sharp decline in sales turnover ensued as companies are not able to find external financing for their working capital. , Chairman of the Syndicate of Importers of Foodstuffs, said: “Importers and other businesses are using their own resources to finance their operations. This has adversely affected their sales and is reflected in a significant shrinkage of the GDP.” He said that the difficulties importers are undergoing to pay in cash for imports are somehow alleviated by the fact that they, themselves, are also selling in cash to local distributors. The cash economy has also made investment in new expansions a major challenge. This is particularly vital for manufacturers, especially those selling their products on global markets where available bank credit allows their rivals to invest in new machinery to boost their productivity and enhance their competitiveness. “The main disadvantage of the cash economy for a manufacturing company is that it is an obstacle to growth. Each three to five years, a factory has to invest in new machinery or to upgrade its existing technology. This undermines its competitiveness. More than three years have passed, Deputy Chairman of the Association of Industrialists.
