Stephen Omiri, Macroeconomic Analyst and CEO of Eye Media and economist Stephen Ihude. (Photo: Awan Moses/Eye Radio).

Macroeconomic analysts have encouraged the Bank of South Sudan and commercial banks to give enticing incentives to depositors to motivate them into keeping cash in the banks instead of hoarding money in their houses.

This week, a member of the national parliament, Paul Baba Ezbon, expressed concerns about the alleged presence of excess South Sudanese pounds in the market.

Some citizens also believe the huge presence of cash in the market is caused by the widespread practice of keeping money outside the banking system in the country.

Meanwhile, economic analysts who spoke on Eye Radio said hoarding is due to the high levies on bank withdrawals, lack of incentives, and limited banking systems.

Stephen Omiri, a certified public accountant, said charges on withdrawals are higher in South Sudan compared to what is charged in the region.

According to Omiri, the cost of keeping money in the bank heavily discourages the public from keeping money in the banks.

“People need to be encouraged to put their money in the bank, and when you put money in the bank, you need to earn something on your money,” he said on Eye Radio’s Sundown Show.

“In South Sudan today, when I put my money (in the bank), I don’t earn interest, and that makes people a bit quite discouraged because people are not encouraged to keep money in the bank.”

“There are also huge withdrawal charges today. So, take, for example, if you deposit $100 and then you have an emergency and you want to withdraw that $100 from the bank, the bank will charge you $6, so you lose your $6.”

“People see that as a lot of money, and if you convert it to the market rate today, it’s around SSP 30,000 that you are losing, and that is extremely expensive compared to what is happening in the region.”

Omiri suggested encouragement of digital transactions, redenomination of currency, strengthening regulatory frameworks, and public awareness campaigns to educate the masses about the risks associated with hoarding cash.

This, according to him, will also enable the public to understand the benefits of using formal banking channels, which can encourage more people to deposit their money in banks.

On his part, economist Stephen Ihude said people choose to keep money in their houses instead of the banks due to the failure of the financial institutions to provide interest.

According to him, the lack of incentives or interest by the banks makes customers hesitant to use banks.

“It is true people are keeping money in their homes or keeping large amounts of money with them (hoarding). The reasons are clear, in order to meet the daily transactions, which are not clearly known.”

“Depositing money in the bank, is it of benefit to the consumers in terms of interest? Are banks offering rewarding interest for people to keep money in the banks? If not, then it might also be that people find it profitable or useful to keep money outside the banking system.”

“So, you cannot force the public to bring money to the banks, unless through incentives, through interest, offering interest, and that will be a motivation to make them deposit money in the bank accounts.”

When asked about the risk factors associated with cash hoarding, Ihude said the practice makes it difficult for the Central Bank to ascertain the amount of money in circulation.

He underscored that the practice damages the country’s economy. The economist strongly suggests efforts towards enabling banks to provide interest or incentives to encourage banking transactions.

“Of course, it is harmful, the money circulating outside the banking system; that money cannot easily be accounted for by the Central Bank, and how much is it in circulation? And so, for the purposes of regulating the quantity of money in supply, it is not going back.”

“This is really damaging the economy. The banking system does not reward people for saving.”

“When you have a savings account, what interest do they give for that as an incentive, as a motivation incentive to encourage people to keep money in the bank, whether it is foreign currency or local currency accounts?”