Sunday, September 25, 2022

Mobile money transfers take a big hit in Zimbabwe

Mobile money transfers1

“Order out of chaos”, defines what happened in Zimbabwe when the economic crisis prompted the rapid adoption of mobile money, after going through a harsh decade of economic crises, which included currency instability, hyperinflation and a collapse of the formal financial system.

However, at a time when mobile money transfers are most needed, Zimbabwe has decided to ban mobile money transfers, claiming that some companies were using these platforms for illegal activities in the country, contributing to severe disruption of the economic cycle.

Unexpected ban of mobile money platforms

The government’s decision to ban the biggest transactional platform will leave a large number of citizens vulnerable; the move will have harsh implications for many Zimbabweans who have grown increasingly reliant on mobile money transfers amid the pandemic.

The belief of some policymakers is that mobile money transfers are responsible for stimulating the huge exchange rate because it constitutes about 83% of the volume of transactions on the national payments system in Zimbabwe, which is equal to a parallel market.

The ban was enforced after the government discovered some money platforms were used for criminal activity, which they are currently investigating.

“Government has, with immediate effect, undertaken a series of prudent and coordinated interventions to deal with malpractices, criminality and economic sabotage perpetuated by wolves in sheepskin,” Zimbabwe’s Secretary for Information, Publicity and Broadcasting Services, Nick Ndabaningi Mangwana, said. “All mobile money transfers have been suspended in order to facilitate intrusive investigations, leading to the arrest and prosecution of offenders.”

The impact of the ban

The ban of the mobile money apps resulted in a blow to financial inclusion as approximately 50,000 mobile money agents will lose their source of income, especially customers in the rural areas of Zimbabwe. In addition, restricting the use to one mobile wallet account per person with a daily transfer limit of ZW$5,000 (US$50), and mobile money transfers have been abolished.

A way forward

Instead of abolishing all mobile money apps that serve millions of citizens, the government could prosecute services found guilty of money laundering and trading without a license, whilst allowing other reputable platforms to resume business.

As such, a financial policy should be adopted by the Reserve Bank, to facilitate the expansion of safe and accessible mobile money services for Zimbabweans.