- Zimbabwe’s economic history has been turbulent with hyperinflation, currency devaluation, and a shortage of the Zimbabwean dollar.
- To cope with these challenges, Zimbabweans embraced digital payments.
- In H1 2023, digital payment values rose by 40%, with transaction volumes seeing a slight 4% decline.
- Mobile money services such as EcoCash, OneMoney, Innbucks, O’mari, and Telecash are now crucial for transactions in Zimbabwe.
For years, Zimbabwe has grappled with a severe shortage of physical currency. The nation’s economic turmoil commenced with hyperinflation, forcing the abandonment of its own currency in 2009. Instead, a mix of foreign currencies, primarily the US dollar, came in helping to steady the economy.
However, by 2015, the US dollar began vanishing from formal banks, resulting in a significant scarcity. Consequently, individuals and businesses started hoarding US dollars. The USD was considered a safe investment rather than a means of exchange.
Introduction of Bond Notes in Zimbabwe
To To combat the US dollar shortage, Zimbabwe’s central bank introduced bond notes, acting as a substitute currency. This move was supported by a US$200 million bond facility from the Africa Export-Import Bank.
Regrettably, rampant black market speculation swiftly eroded the value of these bond notes, intensifying the currency scarcity. In response to this crisis, the central bank introduced electronic notes as a temporary solution.
On February 20, 2019, both physical and electronic bond notes were merged into a new currency called the Real Time Gross Settlement (RTGS) dollar.
According to a report by The Zimbabwean Mail, this currency amalgamation included existing RTGS balances in bank accounts, Bond Notes cash, and Bond Coins.
The new currency faced immediate challenges, becoming a target for black market speculation, which caused a significant devaluation. In an attempt to defend the Zimdollar against such speculation, the country’s finance minister, in June, prohibited the use of foreign currencies in local transactions, as reported by Al Jazeera on July 15, 2019.
Despite the government’s efforts to ban foreign currencies in local transactions, the Zimdollar’s value continued to decline, raising concerns about its long-term sustainability. Amid this currency turmoil, the Government of Zimbabwe intensified its promotion of non-cash payment methods.
Also Read: Are gold-backed digital tokens a threat to Zimbabwe’s financial inclusion?
Digital payments systems in Zimbabwe
In a 2016 note by the Reserve Bank of Zimbabwe (RBZ), various sectors, including retailers, wholesalers, businesses, and government entities, were encouraged to embrace electronic payment systems, such as point of sale (POS) machines, mobile, and internet banking. Banks and payment service providers were entrusted with facilitating the shift towards cashless transactions through public awareness campaigns.
The concentrated endeavors to boost digital payments systems in Zimbabwe have yielded positive outcomes. The payment systems sector, which includes payment service providers and participating banks, displayed resilience and achieved noteworthy enhancements.
During the presentation of the monetary policy statement on August 9, 2023, RBZ Governor John Mangudya disclosed that in the first half of 2023, digital payment transaction values saw a substantial increase, averaging 40 percent, with transaction volumes showing only a slight 4 percent decline.
National payment system
During this timeframe, a total of 376.6 million transactions were conducted through the national payment system, amounting to ZW$83.6 trillion in value. The Real Time Gross Settlement System (RTGS) remained prominent, managing substantial transactions with a total value of ZW$48.0 trillion.
Additionally, Zimbabwean banks increasingly engaged in the SADC Real Gross Settlement System (SADC-RTGS), processing 2,159 transactions valued at ZAR3.1 billion within the same period.
The government’s proactive initiatives aimed at fostering the adoption of digital payments systems played a pivotal role in driving this transformation. Directives from the Reserve Bank of Zimbabwe and other governmental bodies encouraged businesses, including retailers and service providers, to incorporate electronic payment systems like point of sale (POS) machines into their operations, simplifying cashless transactions for consumers.
Thousands of people, who were previously not in the formal banking system, found digital payment solutions to be more accessible and convenient as a result.
Rising demand for digital payments
To accommodate the rising demand for digital payments systems, Zimbabwe has witnessed significant investments in related infrastructure, including expanding internet access and mobile network coverage. These improvements have made it more convenient for people across the country to engage in digital transactions.
Digital payment methods, including mobile money services like EcoCash, OneMoney, Innbucks, O’mari and Telecash, have become indispensable for conducting transactions. According to EcoCash Holding’s 2023 Annual report, EcoCash closed FY23 with 4 million active customers against a total of 8 million registered customers.
The company is also offering mobile money accounts to children. According to the group’s Chief Executive Officer, Mr Eddie Chibi, EcoCash Junior Wallet offers a mobile money wallet for children between the ages 9 -18 years.
The Junior Wallet is financially including the previously excluded young people to enhance our value proposition, reduce customer pain points, and improve financial inclusion.
