tapping into the unbanked in Zimbabwe

TRYING TO RE-ESTABLISH CONFIDENCE IN BANKING

Since well before the dollarization of the economy in 2009 a lot people had grown dissatisfied with the banking system as the withdrawal limits and inflation had left a lot funds totally decimated. The high service fees and low interest on deposits meant that for the most part the exercise of banking was a costly one and subsequently people lost confidence in banks. While dollarization of the economy has ensured that inflation has been kept in check, it is the high banks service fees as evidence by the high non-interest income accruing to banks plus the low interest on deposits that continue to have many shunning the banking system.

Indeed deposits have been growing steadily but it is their transitory nature that continues to be a cause of concern because such deposits do little to aid economic recovery and there is obviously a reason for this. According to a survey by ZEPARU a local research organisation about $2.5 billion remains outside the banking system and also a snap survey carried out by the local broadcaster on the subject revealed that a lot of potential banks clients are still reluctant to embrace banks once more. The major problem according to this survey was the high fees charged and the lack of meaningful interest on deposits if there is any. Of course the previous acts by the central bank at the height of hyperinflation also still linger and since there has not been any reassuring reform at this institution people still avoid keeping their funds in banks.

It is in the back ground of this that the country’s mobile phone operators are attempting to tap into this portion of the population that is unbanked through various products known a ‘mobile wallet’. Telecel, Netone and Econet have all launched facilities which allow subscribers to send and receive cash and the emphasis is that you do not a bank account to use or access these services. The essence of this whole exercise is to have the population to at least have confidence in other economic agents who may not necessarily be banks and in this case mobile phone companies. Economic recovery in the absence of direct multilateral lender support means the domestic scene is the only viable option to fund or recapitalise industry yet this cannot happen as long as the financial system appears hamstrung by the lack of confidence in it.  An advertisement campaign by Econet explains that people will simply have to follow instructions on the sending and once a confirmation message is received by the beneficiary he/she can then go to a participating outlet to redeem the cash.

 It’s of course early days yet to tell if this is going to be a success but the sheer size of the infrastructure and organisations involved may point to its success. What is imperative is that these companies do not repeat the same approach of charging high fees for these transactions something many people are still very sensitive to. Once people feel secure with this innovative system then perhaps we might witness a significant increase of transactions that currently take place in the informal economy coming on to the fore.

This may seem unorthodox but it may perhaps be the best shot at solving this problem of low confidence in banks and with millions of mobile phone subscribers as potential clients we can only keep our fingers crossed that this turns to be a resounding success.