Cash Liquidity Crisis in Libyan Commercial Banks: The Effectiveness of Expanding Electronic Payment Services as an Alternative Solution

Abstract

This study investigates the acute cash liquidity crisis in Libyan commercial banks and critically assesses the effectiveness of expanding electronic payment services as an alternative mechanism to alleviate the pressure on physical paper currency. The research problem centers on the severe disruption of the national monetary cycle resulting from widespread cash hoarding outside the banking system and the consequential erosion of mutual depositor-bank trust. Utilizing a descriptive-analytical methodology supported by empirical data and statistical bulletins from the Central Bank of Libya (CBL), the paper tracks the development of the national payments infrastructure, including the National Switch, Point of Sale (POS) terminals, debit cards (Tadawul, Numow, Rafeeq), and mobile payment applications (OnePay, Sadad, Edfaali). The findings demonstrate that while electronic payment systems have facilitated commercial retail transactions and curtailed physical bank queues, their overarching capacity to absorb the liquidity crisis remains constrained by structural obstacles. These include telecommunication instabilities, cybersecurity risks, consumer behavioral resistance, informal currency-exchange premiums imposed by merchants on card transactions, and deep-seated institutional distrust. The study concludes with actionable, regulatory, and policy recommendations for the Central Bank of Libya, commercial banks, and telecommunication providers to enforce mandatory electronic payment acceptance across all economic sectors, strengthen financial inclusion, and restore confidence in the national banking sector.