eBusiness Weekly
Enacy Mapakame
While mobile money has increased financial inclusion in the country, some individuals in remote rural areas are, however, exploiting this technological advancement to prey on the vulnerable, unbanked population in these areas.
A common method they use to exploit the mobile money wallet holders in the remote parts of the country is by offering fintech services at extortionate rates.
These exploitative entities or individuals often take advantage of the financial illiteracy prevalent among the unbanked population and their desperate need for financial services, charging them far above the typical rates for transactions, transfers, or even loans.
As a result, wallet holders end up paying exorbitant fees to access financial services, further exacerbating their financial hardships.
“Businesses here prefer cash to mobile money,” said 32-year-old Susan Mbesu based in Chibuwe Village in Chipinge district, 421 kilometres South-East of the capital city Harare.
“We can transact with mobile money,but it will be expensive for us, shop owners add extra charges on top of the usual transaction cost, which is discouraging,” she said.
When this publication approached one of the local grocery shop owners in Chibuwe, via mobile phone, it was established that a crate of eggs costs almost 100 percent more than the actual price in shops like Pick n Pay or OK Zimbabwe and other retailers in the country.
Mobile money transactions have an intermediated money transfer tax (IMMT) popularly known as the 2 percent tax, which is levied on transactions that involve the transfer of money between different accounts, including bank accounts and mobile money wallets. The tax was introduced in 2018 to tap into the informal sector that had for years been shying away from taxations.
Although IMMT is arguably the highest in the Sub-Saharan Africa region, individuals in the remote areas have further added a premium to transactions on mobile money, which is undermining the original intent of fintech as a tool for democratising financial services and promoting economic growth and financial inclusion.
“I prefer cash, and if you want to transact using mobile money, then I have no option but to add a premium to cater for my transport costs to the bank or agent.
“My local suppliers of fresh produce here do not like EcoCash, so I can’t help it. I also get a lot of my merchandise from South Africa,” said one shop owner. The shop owner, however, said they would prefer mobile money in US dollars as opposed to the local currency, although the same still attracts a charge.
“It is difficult for me to move large volumes of money to buy South African Rands for restocking if all the money is in my wallet,” added the shop owner.
But Statutory Instrument 80 of 2020 states that the stipulated transactions are to be followed or breach of such will attract legal action against perpetrators. However, there is lack of monitoring and enforcing by operators and regulator on use of the service across the country.
Mobile money platforms like EcoCash have revolutionised fintech in Zimbabwe over the past decade. Digital wallets have now become popular, at a time there is still a huge percentage of the population that is unbanked and excluded from formal financial services.
Statistics from the Reserve Bank of Zimbabwe (RBZ) show that in a country of about 16 million people, only 5,9 million debit cards and fewer than 16 000 credit cards have been issued. There are also fewer than 650 000 internet banking users in the country, while an estimated 7,1 million mobile wallets are operational in Zimbabwe.
According to a Finmark study cited by consulting firm Mondato, large informal sector is mainly cash driven while only a few traders accept digital payments, particularly local currency. The study points out that mobile money usage by informal traders is mainly for personal transactions and not for business or trade purposes.
High transaction fees, statutory limits on amounts one can transact in a week or a month have made it difficult for traders to fully adopt digital platforms like mobile money.
However, despite these challenges, mobile money transactions have been growing among the informal traders although dominated by airtime purchases at 35 percent, payment of goods and services at 30 percent while receiving or sending money accounts for 29 percent and 23 percent respectively, according to the Finmark report.
The concentration of these digital wallets and other fintech services has, however, remained in the urban and peri-urban centres with a lot still needed to improve its adoption in some remote areas of the country.
The challenge is not prevalent in Zimbabwe alone but in many developing countries, creating scope for increased awareness to boost adoption of fintech and tap into the vast opportunities available.
Speaking at the Sanlam Summer School for Financial Journalists 2023 last week, Africa Fintech Network chief executive officer Dr Patrick Konte said the region has huge opportunities to leverage the demographic dividend for the growth of fintech.
“Opportunities are huge,” he said, adding the region is seeing improvements in mobile networks and infrastructure development, which are all essential for fintech.
According to Statista, the fintech market is expected to continue its rapid growth trajectory, driven by ongoing technological advancements, changing consumer behavior, and regulatory support.
In Zimbabwe, digital payments are likely to remain a dominant trend, as consumers increasingly prefer the convenience and speed of mobile payment solutions in urban centres. Digital investment platforms are also expected to grow in popularity, as more individuals seek to manage their finances online.
The Government is also looking at leveraging mobile money services to boost financial inclusion in the country and further tap into the informal sector and the small to medium enterprises (SME) segment, which now oils the economy.
Already, the country has registered significant progress on the access strand, with 95 percent of Micro-SMEs formally served, up from 18 percent in 2012, despite the disruptive effects of the Covid-19 pandemic.
Women’s financial inclusion increased from 68 percent in 2014 to 83 percent in 2022, while men that are formally served increased from 70 percent to 85 percent on the back of increased access to banking products.
