- Tunisia’s Cheque Reforms Trigger Cash Surge, Raising New Risks for Bank Lending
Tunisia’s reliance on physical cash has surged to a record 30.04 billion dinars, or about US$10.50 billion, as tougher rules governing cheques push households and businesses towards banknotes and coins, creating fresh pressure on banking-sector liquidity.
Data from the Central Bank of Tunisia show cash in circulation reaching the record level as of August 21, up from 25.90 billion dinars a year earlier, representing an increase of roughly 16.00%. The increase is significant because it means a larger share of money is being held outside bank accounts.
For Tunisia’s banks, that can translate into fewer deposits available to support lending to households and companies, while also making day-to-day liquidity management more difficult.
Financial analysts say reforms introduced last year tightened the rules governing the use of bank cheques and increased penalties associated with bounced or invalid cheques. The changes have encouraged some businesses and consumers to rely more heavily on cash when settling transactions.
Reforms intended to improve discipline around cheque payments may strengthen payment credibility, but if consumers respond by moving transactions out of the banking system, the result can be a larger cash economy and weaker deposit mobilisation.
For banks, deposits matter because they form an important source of funding. When money remains in accounts, banks can use part of that funding to extend credit, subject to liquidity, reserve and capital requirements.
When cash is withdrawn and held physically, the money effectively moves outside that intermediation channel.
The larger Tunisia’s cash holdings become, therefore, the more difficult it may become for the banking system to convert household and business savings into productive credit. That matters for an economy in which access to finance remains important to business investment and household consumption.
A sustained reduction in deposits could force banks to compete more aggressively for funding or rely more heavily on central-bank liquidity, potentially increasing the cost of financial intermediation. The latest figures also expose the continuing limits of Tunisia’s digital-payments transition.
Many Tunisians continue to prefer cash for everyday transactions, particularly outside the country’s larger urban centres, where adoption of electronic payments and digital banking remains relatively slow.
It also reflects the persistence of an economy in which physical cash remains familiar, widely accepted and, for many users, easier to access than electronic alternatives. The challenge for policymakers is that cash carries economic costs that are less visible than the notes themselves.
A larger cash economy can weaken the banking system’s deposit base and reduce the traceability of transactions. It can also make it harder for governments and financial institutions to observe economic activity, particularly where transactions take place outside formal accounting systems.
That does not mean every cash transaction belongs to the informal economy. But the greater the proportion of economic activity conducted outside bank accounts, the harder it becomes to build a fully intermediated financial system in which savings can be efficiently transformed into investment. Tunisia’s experience therefore illustrates the importance of sequencing financial reforms.
But reforms affecting one payment instrument need to be accompanied by credible alternatives.
If consumers are discouraged from using cheques but do not trust, understand or have easy access to electronic transfers, cards and digital banking, they may simply migrate towards cash. The country has taken steps to modernise cheque processing, including a unified electronic cheque platform and updated central-bank regulations.
But the record cash figure suggests that behavioural change is moving faster than digital substitution. For banks, the consequences could become more pronounced if the trend continues. A 16.00% annual increase in currency circulation is not simply evidence that more transactions are being settled physically.
If banking-system liquidity becomes tighter, lenders may become more selective, raise borrowing costs or reduce credit availability.
That would create an ironic outcome in which changes designed to improve financial discipline around payments indirectly make formal financing more difficult to obtain.
They need to maintain credible enforcement against misuse of cheques while simultaneously ensuring that the move away from traditional payment instruments does not result in a broader retreat from formal banking.
That will require faster adoption of electronic payments, greater confidence in digital banking and infrastructure that works beyond Tunisia’s major cities. It may also require financial institutions to make digital transactions cheaper and easier than using cash.
Consumers rarely abandon cash simply because governments prefer electronic payments. They switch when digital alternatives are convenient, trusted, inexpensive and widely accepted.
Until that happens, tougher restrictions on one payment method can produce substitution rather than formalisation. Tunisia’s record cash holdings therefore reveal more than a temporary liquidity problem.
They expose a broader question about the country’s financial transition: can Tunisia modernise payment rules without pushing more of its economy outside the banking system?
What is clear is that the amount of physical money circulating outside bank accounts has never been higher. At US$10.50 billion, Tunisia’s growing cash pile has become large enough to matter not only for how people pay, but for how effectively the banking system can fund the economy itself.
