Paper
Central Bank Digital Currency and Financial Inclusion
57 pages
Central bank digital currencies (CBDCs) in developing countries can increase access to financial services, boost lending and reduce the risk of disintermediation, which is the process of removing banks from financial intermediation.
The author finds that CBDCs can increase overall lending if:
- Bank deposit liquidity risk is low.
- The size and relative wealth of the previously unbanked population is large.
- CBDC is valuable to households as a means of payment or for credit-building.
In addition, CBDC still holds value for household welfare even when overall lending decreases given that households benefit from the value of using CBDC for payments. CBDC also provides an alternative "safe" savings vehicle, and it generates greater surplus in lending by reducing credit-risk information asymmetry.
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