Unbanked money on rise

HARARE - The Bankers Association of Zimbabwe (Baz) has commissioned a study to ascertain the amount of cash circulating outside the formal system, which is estimated to be as much as $7,4 billion.

While initial approximates put the figure at around $2 billion, it is believed that the unbanked money has increased since dollarisation in 2009 with transacting platforms such as mobile money transfer services fuelling the growth.

Market observers contend that the situation is caused by loss of confidence in banks following the 2007-8 financial crisis which saw depositors losing their money.

Also, prior to the dollarisation — under which Zimbabwe adopted a multi-currency system dominated by the US dollar — the informal sector flourished as unemployment rose resulting in money trickling out of the formal system.

“As one delves deeper into the informal sector, several estimates ranging from $2 billion to $7,4 billion have been put forward to provide estimates of the total value of cash circulating outside the formal system,” Baz’s president George Guvamatanga said at the World

Consumer Rights Day commemorations last week.

He added: “but this figure currently is unknown. As Baz we have actually started a study to establish exactly how much money is circulating outside the banking sector.”

However, Guvamatanga said banks’ role as financial intermediaries had not diminished.

“Banks remain the largest importers of cash in the economy. Most of the cash that is circulating outside the banking system originated from the banking sector,” he said.

Guvamatanga — also chief executive of Barclays Bank Zimbabwe — pointed out that mobile money had somehow demonstrated itself as a disruptive innovation that has changed the role and definition of money in its traditional sense.

He said banks were not afraid of competition from mobile money services but there was need for comprehensive legislation to ensure an even playing field between mobile banking, payment systems and formal banking.

“There is need for interoperability of infrastructure as a necessary condition of mobile banking services. This can be defined as key success factor in the drive towards mobile banking and greater financial inclusion.

“The sharing of infrastructure promotes what is known as economic and productive efficiency while avoiding duplicating infrastructure and leading to dynamic efficiency,” he said, further stating that this would promote healthy competition and product diversity.

“We want regulators to adopt a legal framework that allows collaboration among banks and consumers.”


Comments (7)

Kikikikiki Guvamatanga you are mad. You think people will choose to use banks instead of mobile money transfers! Thats a dream. Take for instance to do na international tranfer from the UK, where i am at the moment, it takes at least a week for my money to reflect in my Zimbabwe account. Compare this with say, western union, which ensures my money gets to Zimbabwe within 10 minutes. In addition, the people outsider Zimbabwe, have no confidence at all in the baking system following the stolen election. Mark my words, your estimates are half of the actual unbanked money.

Exiled - 23 March 2014

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maintenance solutions - 24 March 2014

can BAZ tell me why I would bank my $1000 which I intent to use in December, when I will be charged a minimum of $5/mnth and will be made to leave a min of $20 when I eventually decide to use it. I will be guaranteed to lose a minimum of $80 to the bank. hence I will rather not

mwana - 24 March 2014

BAZ must revise the cost of me keeping money in the bank. Im charged to withdraw over and above the monthly bank charges. It only takes a fool to deposit $100 in a bank because after a few months the bank calls you, "Mari yako yapera huya neimwe" where is the saving?

Mari Yangu Kwete - 24 March 2014

If it wasn't a legal requirement very few people, if any, would opt to get their salaries thru banks, trust me. Charging $5/m then a whooping 1.5% of amount withdrawn for giving u business on a service that I can even do without will come back to haunt u sooner or later. Apart from that wen I want a loan u charge 22% interest, 5% establishment fee, 3.1% insurance. U r creating problems for yoself then look around 4 sum1 2 blame, shame on u! Ani1'l definitely look 4 alternatives.

Neecoreluss - 24 March 2014

Econet deserves to be spared from opportunist. People who want to harvest from what they have really not sowed. The fact that Econet has the most disbursed infrastructure awarding the widest coverage is in essence a strategic investment that they freely deserve to receive a return from. Infrastructure sharing, IS NOT IDEAL.

Fact Factor - 25 March 2014

There is serious confusion within the BAZ. Unbanked money has never been part of ourstatistics. Econet were smart to reach it without too many requirements. The real issue is that those who bank will always bank. The NSSAs, Old mutuals, Pension Funds, ZIMRa, ZESA Supermarkets etc. However where an economy is shrinking people want to blame everyone. banks must lend in order to generate more business activity. Money held by the informal sector will never be useful to banks because it comes and goes and that is not what banks want. Just analyse movements on Ecocash and you will understand. umwe anenge achidepositor umwe akamirira kutora. Handiro basa rebank kutumira mari. Ravo nderekutsvaga mari dzinigara muBank kuitira kuti vakweretesewo vamwe vagowana mari yavo. Lets go back to conventional banking and things will start to happen again.

Timothy Thorton - 26 March 2014

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