ZIMBABWE’S plans to embrace financial inclusion initiatives to foster inclusive economic growth and social development are in jeopardy following the Central Bank’s decision to stifle mobile money platforms.
The Reserve Bank of Zimbabwe (RBZ) launched the National Financial Inclusion Strategy in 2016, targeting the underserved and marginalised population. At the time, smallholder farmers, small-to-medium enterprises, women and youth accounted for the bulk of the economically active population groups that were significantly financially excluded.
A Consumer Survey conducted by FinScope in 2014 revealed that over 70 percent of the country’s adult population were unbanked, or financially excluded.
But now, the phenomenal rise of mobile money usage to an estimated 10 million users across the country, and the surge in mobile payments to over 80% of all electronic payments, has gone a long way towards closing the financial inclusion gap.
However, despite huge strides made by mobile money service providers in helping to empower and pull the previously financially excluded Zimbabweans into the formal economy, RBZ governor Dr John Mangudya’s pronouncements in his lastest Monetary Policy Statement – in which he drastically curtailed and abolished some key mobile money services – now poses a huge threat to the progress made towards achieving financial inclusion to date.
The Central Bank Governor introduced a variety of controversial policies aimed at strangling mobile money platforms – particularly Ecocash, which controls over 96 percent of the market – at a time several banks are closing brick-and-mortar branches and themselves taking the digitalization route, with services skewed towards e-commerce in line with global trends. With scores of bank branches closed, rural and farming communities have nowhere to go and open bank accounts or collect bank cards.
In the past few months financial institutions such as FBC Holdings, NMB, Standard Chartered, Stanbic and CBZ Holdings, among others, have stepped up the closure of branches across the country. The massive branch closures, coupled with the long-running cash shortage in the country, has partly spurred the growth of mobile money usage in the country.
It then came as a surprise to all and sundry when the RBZ Governor abolished mobile money agents, bulk payments, multiple wallets and limited mobile money daily transactions to a paltry ZWL$5 000, on the pretext that people should revert back to formal banking channels.
The majority of Zimbabwean depositors lost confidence in the country’s banking system back in 2008 and were traumatised again by the government’s decision in 2016 to expropriate their United States dollar deposits and replace them with bond notes.
While there is no doubt there would have been some people who were abusing Ecocash, just like there will be people who try to abuse any system, there is no justification for the aggressive, slash and burn approach adopted by the Central Bank against mobile money platforms.
The real losers in the shutting down of Ecocash services are not the culprits that were extorting the public, but the ordinary person such as women and youths trying to eke out an honest living. The real losers are the poor vendors on the streets and the poor peasant farmers in the rural areas.
By his own admission, Dr Mangudya conceded that the global coronavirus pandemic was also making life difficult for the ordinary person after banks temporarily closed branches to combat the spread of the disease.
“Further, with the recent surge in the number of COVID-19 cases, a number of banking institutions are temporarily closing some branches to facilitate deep cleaning and disinfecting of branches and testing of staff members. Banking clients are being encouraged to make use of digital platforms,” the Governor said in his Monetary Policy Statement.
With the economy heavily informalized, the majority of SMEs, farmers and individuals use mobile money to make payments to their employees – most of who do not have bank accounts. They also use mobile money to pay for goods and services. It is therefore only reasonable, and in the spirit of financial inclusion, for the authorities to promote, rather than penalize, the use of mobile money.
What is even more ironic is the fact the Dr Mangudya admits that the economy is not performing and many people will lose jobs this year due to COVID-19.
“The pandemic has necessitated new business models, which call for intensive training on the required new skills, including online marketing. Further, the unavoidable job losses are likely to result in growth of the informal sector. Relevant policy actors and stakeholders are urged to optimally coordinate efforts and render appropriate targeted support to minimise suffering of those affected,” he said.
It is difficult to see how he expects the informal sector to thrive when the measures he announced all but choke the only viable and reliable platform available to the informal sector and majority of the population.