Six months after Zimbabwe’s financial services sector was paralysed by a severe shortage of cash, the aggressive introduction of mobile and electronic money platforms is delivering immediate results.
By Brezhnev Malaba
Although there are still long queues of people desperate to withdraw money from banks, there is a marked increase in the use of mobile money and plastic cards for payment in shops.
Finance Minister Patrick Chinamasa says the financial sector now holds $6.1 billion in deposits owing to an upturn in the use of mobile payment platforms and “plastic” money in the form of credit and debit cards.
Although the formal financial system still controls less money than the informal sector, which circulates more than $7bn, the formal sector has registered immense improvement from $4bn at the beginning of this year.
The country is grappling with a multi-faceted economic crisis characterised by 95 percent formal unemployment, a trade deficit, de-industrialisation, unsustainable foreign debt, and declining revenues.
Chinamasa says Zimbabwe’s reliance on US dollars has made it near-impossible for the authorities to control money supply in the $14bn gross domestic product economy.
The government’s big task is to continue encouraging companies to promote the use of plastic money by installing point-of-sale machines which facilitate transactions.
“I am pleased with that (cash shortage) crisis because it has given us an opportunity to come up with solutions to that problem. We need, of course, to secure the point-of-sale machines,” Chinamasa added.
The government says it now forces the 40 biggest companies to channel their daily cash takings to the formal banking system.
Officials accuse many of these firms of previously refusing to bank their daily proceeds.
The new measures are easing the cash crunch.
Norman Mataruke, a director at the Reserve Bank of Zimbabwe, says the growth of mobile money payments has brought convenience and financial inclusion.
“The mobile money industry has provided the possibility of outreach, vastly beyond traditional banking networks and at significantly lower costs due to the mobile phone characteristics of ubiquity, convenience, speed, security and lower cost,” he said.
Zimbabweans are discovering that mobile money has the added advantage of enabling low-income earners to access financial services that were previously beyond reach.
Modest loans can finance a small business, pay school fees or cover a medical bill.
“This has facilitated provision of affordable financial products to low-income households and micro-enterprises that do not have easy access to finance,” Mataruke said.
The US dollar’s international reserve currency status makes it attractive, but this creates a headache for the Zimbabwean authorities who complain that the money is illegally siphoned out of the country in huge amounts.
“That is what I think we need to understand. Because of its appreciation, everybody is looking for US dollars. They (companies and traders) find ways to come and mop up, siphon and fish out our US dollars,” Chinamasa says.
Economists say the growth of financial technology in Zimbabwe is lowering the cost of transacting.
George Manyere, whose company launched a new mobile payment platform last week, says innovative technology is the answer to banks that are ripping off clients through inflated transaction fees.
“The only way you can get over that (bank charges) is through technology. We want to digitalise money charges and transactions. We need to make it convenient and easier. We do not need cash circulating in the country,” he said.
The number of mobile money subscribers has shot up from 6.7 million to 7.3 million. Economists say an estimated 25 percent of the adult population is financially excluded. – Africa Ind