Mahi Sall, Advisor, Fintech-Bank Partnerships, Payments and Financial Inclusivity
January 25th, 2023
Mahi Sall is the CEO & Founder of FinXpair, a Berlin-based strategic advisory boutique firm focu[...]
Digital innovation during crisis launches tea auctions and digital currencies
IMF | Steven Dorst | March 9, 2021
Never let a serious crisis go to waste.” Innovators around the world are taking the saying seriously, responding to the disruption caused by the COVID-19 pandemic with creative digital solutions.
The Bahamas: first digital currency
In October 2020, The Bahamas leapfrogged into the digital vanguard with the launch of the world’s first central bank digital currency—the sand dollar. Pegged one-to-one to the Bahamian dollar and using a blockchain-backed digital token, the new currency is available to people and businesses to buy and sell goods and services and send money to each other. Sand dollars are issued and regulated by The Bahamas’ central bank.
- The Bahamas territory is spread out over 700 islands—making it unprofitable for commercial banks to have ATMs or physical branches on remote, sparsely populated islands. Extreme weather events make the cost of maintaining infrastructure even steeper.
See: Canadian researchers develop CBDC digital currency proposal for Bank of Canada
- As a result, the most vulnerable often lack access to financial services. The need to serve the unbanked and underbanked population, along with a drive to modernize the payment system, spurred the central bank’s introduction of the new digital currency.
- It is still early days, with only $130,000 worth of sand dollars in circulation compared with $500 million Bahamian dollars. Customers’ initial reaction has been positive. Those who are using the sand dollar enjoy the ease, faster turnaround, and lower costs.
“When I first heard about the sand dollar, I was extremely excited,” says Brandon Kemp, founder of Tin Ferl, a popular pop-up food park in Nassau. “The amazing thing about the sand dollar is that there are no fees or transaction costs. So, if I need to pay one of my staff, I can do it right there in the moment; they receive it literally within seconds, and everybody is happy with that.”
Sri Lanka: tea auction transformed
For more than 125 years, the tea industry has depended on a tradition-steeped auction where hundreds have convened twice a week at the Ceylon Chamber of Commerce to buy and sell Sri Lanka’s finest leaves. When COVID hit, the world’s oldest tea auction, which had functioned without fail for more than a century, was suddenly unable to bring together buyers and brokers for the weekly bidding. Plantations and factories had nowhere to sell their product, buyers were left in a lurch, and millions were at risk of losing their income.
See: Retail And The Underbanked Opportunity
- Sri Lanka’s tea auction faced an urgent need to reinvent itself. With brokers and buyers unable to meet in person, the challenge was not just to find an alternative to the live auction, but to get it up and running and yielding good prices—immediately.
- Local IT company CICRA Holdings led technical development, working with brokers trained to interpret the dynamics of in-person bidding and with deep knowledge of tea categories and grades. To succeed, the e-platform would have to reimagine all the human and technical variables of the live auction. Within days, some 300 people had taken part in simulated training programs, with sessions running up to the night before the launch.
- Not only is the new system COVID-safe, it’s also faster, more strategic, and cost-effective—and even yields higher prices. The online auction has also improved transparency and efficiency and reduced duplication of work.
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