Benin’s government has introduced a new tax on large cash transactions in an effort to shift the country toward a digital economy. Since January 1, 2025, cash transactions exceeding CFA100,000 (approximately $159) are subject to a 1% tax. The move, part of President Patrice Talon’s broader strategy to digitize the economy and enhance tax collection, has been met with mixed reactions. While the policy aims to improve financial transparency and boost tax revenues, it faces significant hurdles in a country where most people remain unbanked, financial infrastructure is limited, and cash remains the dominant form of payment.
For many Beninese, the tax is an unwelcome burden. Antoinette, a resident of Cotonou, was caught off guard when she had to pay CFA9,000 in tax while depositing CFA900,000 at a notary’s office for property paperwork. “Why should I pay to use my own money?” she asked in frustration. Like many others, she withdrew cash to avoid delays associated with bank transfers or the risk of rejected checks, only to face the very tax she was trying to circumvent.
Her experience is not unique. At Dantokpa Market, the country’s largest commercial hub, cash still reigns supreme. Vendors, many of whom operate in the informal sector, argue that the tax complicates their business. “We don’t have card machines, and people prefer cash. This tax will just push prices up,” said a phone seller. The government’s push for digital payments may be well-intentioned, but for many small businesses, adopting digital transactions is not a viable alternative.
The tax is part of broader efforts to modernize financial transactions in Benin. Since 2021, businesses subject to VAT have been required to use Certified Electronic Billing Machines (MECEF), which report transactions directly to the tax authority. By the end of 2023, 157,039 MECEF devices had been deployed for 11,073 taxpayers, according to the World Bank. However, adoption remains low in the informal sector, which constitutes nearly half of the country’s GDP.
Despite these challenges, digital payments have been growing in Benin, particularly since the COVID-19 pandemic accelerated financial digitization. Data from the Central Bank of West African States (BCEAO) shows that between 2020 and 2023, digital transactions in Benin increased by 68%, rising from 28 million to 47.2 million transactions. Their total value nearly doubled, reaching CFA2,115 billion in 2023 compared to CFA1,200 billion in 2020.
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Mobile money services, such as MTN Mobile Money and Moov Money, have been instrumental in this growth, especially for unbanked populations. The number of mobile financial service accounts surged from 2.6 million in 2018 to 11.1 million in 2023—a 327% increase. However, mobile money adoption still faces barriers. High transaction fees deter many from using the service for everyday transactions, and mobile payments remain largely confined to utility bills rather than widespread commercial use.
Bank card usage is also rising, with 1.33 million cards in circulation in 2023, up from 800,000 in 2020. However, access to banking infrastructure remains limited. Benin has only 326 ATMs and 498 card payment terminals, mostly concentrated in urban centers, leaving rural areas underserved.
Despite these digital advancements, cash continues to dominate Benin’s economy. Many small merchants argue that digital payments introduce additional costs and technical difficulties. “With cash, there are no extra fees, no system failures—it’s fast and reliable,” said a vendor at Dantokpa Market.
High transaction costs remain a major deterrent. Small business owners already operating on thin profit margins see bank fees and mobile money charges as an unnecessary expense. “Every transaction eats into our earnings. No one wants to pay that,” another vendor explained.
In rural areas, where financial services and digital infrastructure are nearly nonexistent, cash remains not just preferred but essential. With limited banking options, many people rely entirely on physical currency for daily transactions.
The government’s push to digitize payments and reduce cash reliance is a bold move, but success is far from guaranteed. While digital transactions are increasing, structural barriers—including high fees, lack of infrastructure, and deep-rooted cultural habits—pose significant challenges. The informal sector, which plays a crucial role in Benin’s economy, remains largely untouched by these reforms.
For now, many Beninese remain skeptical. The new tax may encourage some to explore digital options, but for most, cash is still king. Whether the government can change this reality will depend on how effectively it addresses the barriers to financial inclusion and ensures that digital payments are not just available but practical and affordable for all.
