In my article of a few years ago, I described how the Dutch Reformed missionaries introduced a form of money that came to be known as chamkono at and around Mvera Mission in Dowa District.
The few trades, such as tile making and basketry, which the missionaries had introduced at Mvera, coupled with the piece work that the locals were engaged in, necessitated the introduction of a form of payment. Initially the people were paid with salt or beads. When the missionaries realized that this was a terribly unreliable form of payment, they introduced a crude coin minted from tin, which they used to pay the people.
The locals called this coin “chamkono” (literally “of the arm”) because with one coin, one could buy an arms’s length of cloth. Chamkono quickly became legal tender at Mvera and in the surrounding territories. This was in the late 1800s. There is no record of any form of money used in Malawi prior to chamkono, which, as things stand now, is the first known unit of money in the country.
When the British introduced their administration in this country, they introduced British money to the economy. I still remember habitually taking a big coin that we used to call a penny to school in the late 1960s. With one penny, a copper coin with a hole in the middle, I could buy several local buns (zikondamoyo). When such a coin got dirty from overuse, we would pluck the leaves of a certain herb and rubbed them against the coin until it became shiny as new, looking very impressive. The silver coins used to be even more impressive after giving them the special herbal treatment described earlier.
The British money that was used in country had three units, namely pounds, shillings and pence. In or around 1972, a new monetary system was introduced, its units being the Kwacha and the tambala. It was a lot easier to transact with the new money as it was decimal, in the sense that 100 tambala equaled 1 Kwacha. The British money had not been decimal. 12 pence, for example, equaled 1 shilling and 20 shillings equaled 1 pound. How crazy!
Money in Malawi, as elsewhere, is a commodity heavily regulated by the Central Bank. It is the Central Bank only that can legally issue or withdraw money into or from the economy. Ordinary citizens like my readers and me can only transact using the money we get from the Central Bank but can do nothing else beyond this. Therein lies the security of money. If anyone is found producing money they will be prosecuted by the State.
Some clever intellectuals have attempted to bypass the Central Banks of their countries by introducing unregulated digital money known today as crypto currency. The security of the crypto currency lies in the use of block chain. The digital money will circulate as a ledger on a computer network having many nodes. Each node will keep the same information about a particular ledger. No single node can vary that information as that will cause a noticeable discrepancy between it and the rest of the nodes on the network. That is how blockchain security works, in a nutshell.
Crypto currency remains unregulated and as such is vulnerable to unexpected volatilities. Something else is being proposed, something which will have the best of both worlds, namely that it will enjoy Central Bank Security as well as block chain security. Dear readers, let us heartily welcome Central Bank Digital Currencies (CBDCs).
Says Kristalina Georgieva of the International Monetary Fund, “If CBDs are designed prudently, they can potentially offer more resilience, more safety, greater availability, and lower costs than private forms of digital money.”
A number of Central Banks are already experimenting with this form of digital money. The Sand Dollar, for example has been in circulation for more than a year in the Bahamas. In a report issued earlier this year, the American Federal Reserve said, “a CBDC could fundamentally change the structure of the U. S. financial system.”
Our local Central Banks is riddled with many problems, so many that CBDCs are probably not anywhere near the top of its list of priorities. Be that as it may, the bank will not lose anything by exploring the possibility of introducing digital money. On the contrary, it has everything to gain, as Malawians will have a safe digital currency that will have great, but cheap, transferability.
In summary, searching within Malawi’s economy throws up chamkono, pounds, shillings, pence, kwacha, tambala and lastly, but by no means least, a real prospect of digital money in the form of CBDCs.