Cash shortages slash mobile money

HARARE - Zimbabwe’s telecoms regulator has said mobile money has tumbled by 35 percent, with cash shortages slowing a race that has seen mobile phones turn into bank books for the “unbanked” to store cash, manage their accounts, make purchases and send and receive money.

The Postal and Telecommunications Regulatory Authority of Zimbabwe (Potraz) said in its 2016 fourth quarter report that mobile money transfers had dropped dramatically as the country struggles with a deepening and persistent cash shortage.

“Also noteworthy, is the decline in the value of mobile money transactions where the value of cash in and cash out transactions declined by 35 percent.

“This shows the impact of cash shortages is having on mobile money transactions, which if not addressed, can cause further decline in mobile money transactions, rendering mobile money business unviable due to low volumes,” Potraz warned in the report.

This comes as those receiving money tend to cash it in immediately, taking the money out of the system and limiting the potential for mobile money to become a medium of exchange — a mobile wallet for buying things or to provide banking services over mobile networks.

The country has three mobile operators — Econet Wireless, Telecel and NetOne — which all run mobile money transfer services which are either bank-based and non-bank based.

Econet Wireless, Zimbabwe’s top mobile operator with more than 9 million subscribers, runs mobile money service Ecocash, which has 4,2 million customers and whose transactions reached $5,5 billion in 2015, up from $3,1 billion previously but has seen revenues plummeting as a result of cash shortages.

Other local mobile money transfer companies are NetOne’s OneWallet and Telecel’s Textacash.

Some 60 percent of Zimbabweans rely on money transfers for daily needs, such as food, medicines and school fees. Currently, there are over 8,9 million registered subscribers across the country while 3,3 million are substantively active, according to Reserve Bank governor John Mangudya latest monetary policy statement.

Sending money by phone was the next best thing but the momentum has been lost due to the intensifying cash shortages, Potraz noted.

Most transactions, though, are a few dollars sent to needy family members.

While the Central Bank has said it is pleased by the strides made by banks and payment system providers in the payments digitalisation journey, the RBZ is curiously calling for “a cash-lite society” — in which cash will no longer be the most common means of payment.

To respond to the cash crisis, Mangudya is calling for the spread and usage of payment channels such as POS and mobile banking agents to all areas of the economy, “especially rural areas”.

This comes as Zimbabwe’s rural population who have no access to banks have fallen in love with mobile money, with transfer facilities near growth points and shopping centres, where some retailers offer the facilities.

Zimbabweans trust mobile money transactions more than banks.

Some banks and mobile network operators have formed strategic partnerships.

The RBZ is also proposing a service to send salaries direct to cellphones via a code they present to an agent or bank for cash.

“Going forward, the (Central) Bank shall also be strongly advocating for e-payroll developments to transform the salary and pension payment systems in order to reduce the cash culture in Zimbabwe,” Mangudya said.

The intensifying cash shortages are adversely affecting gains made in financial inclusion as the proportion of the population accessing formal financial services had skyrocketed from 38 percent in 2011 to 76 percent in 2015 largely as a result of mobile financial services.

Mobile money global remittances have also slowed as a result of the cash crunch that has forced government to introduce bond notes.

Mobile money remittances in sub-Saharan Africa was projected to scale $40 billion in 2016, with the service increasing above 6 percent due to increased mobile connectivity, but has dramatically slowed down in Zimbabwe, according to WorldRemit, a United Kingdom-based online service company that lets people send money to friends and family in other countries.

The government — facing a critical funding shortfall to bankroll its commitments  including its bloated civil service wage bill, government workers’ pension contributions and medical insurance — is turning to the treasury bills market, as the new bond notes — ushered in to help address the epic cash problems — are losing value dramatically and US dollars have vanished from the open market.

The Central Bank has said it was moving to implement measures aimed at addressing the cash shortages.

“The opening up of the tobacco floors (on March 15) will boost the country’s foreign exchange earnings and this is expected to go a long way in ameliorating the liquidity challenges in the market,” Mangudya said.

Comments (1)

Hi, Could you please elaborate how big a problem Liquidity management is in the MFS industry of Zimbabwe?

Salwa Bakht - 18 March 2017

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