Cash shortages slash mobile money

By | March 12, 2017

Source: Cash shortages slash mobile money – DailyNews Live

Gift Phiri      10 March 2017

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.

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