Mobile money limits due for review as inflation reach 837pc

The level of inflation in the country, which reached 837 percent in July, the highest in 10 years, should be used as an indicator that mobile money limits at $5,000 are now due for review.

The latest data from the Zimbabwe National Statistics Agency (Zimstat) also show that consumers now require more for monthly goods and services, with the Total Consumption Poverty Line for an average of five persons per household now pegged at $15,573 against low transaction limits.

The Reserve Bank of Zimbabwe’s decision to continue restricting mobile money transaction limits is thus negatively affecting Zimbabweans’ ease of doing business and hurting small businesses and the marginalized.

In June, the Central Bank introduced a cocktail of measures, including limiting daily mobile money transactions to $5 000 as well as suspending the mobile money platform’s agent and merchant lines in what it said were measures to stabilise the local currency, which has been losing value against major currencies since its re-introduction a little over a year ago.

The measures affected the three mobile money service providers – EcoCash, OneMoney and Telecash. EcoCash is by far the most popular of the three mobile money services, with over 94 percent market share of mobile money users.

But since the ban, Zimbabwe’s annual inflation has since galloped to a 10-year high, coming in at 837,53% in July, up from 737,26% in June this year and pushing the price of goods and services through the roof, rendering the ZW$5,000 transaction cap too low to pay for meaningful amounts of goods and services.

Business owners, farmers, consumers and experts this week said it was critical for monetary authorities to remove the restrictions on mobile money transactions as a way of promoting financial inclusion and improving the ease with which businesses operate.

“Farmers across the country are struggling to pay labour and buy inputs due to limits put on Ecocash. These days $5 000 is nothing really as they need to settle a lot of bills. But unfortunately, there’s nothing our farmers can do,” Zimbabwe Farmers Union executive director Paul Zakaria said.

“We have tried to engage the Reserve Bank to reverse or review the ban and limits imposed on EcoCash, but nothing has moved since May,” he added.

The majority of people in Zimbabwe prefer to use mobile money, which is fast and convenient compared to the traditional banking system.

According to a 2014 Finscope survey, only 30 percent of the country’s adult population have access to banks. One of the main reasons for the large unbanked population in Zimbabwe is geographical inaccessibility (distance) and poor infrastructure, with many of the unbanked population living in remote rural areas.

This, combined with a lack of financial education, creates very high barriers to banking for the rural populations and for the farming communities outside towns.

However, the introduction of mobile money – in particular the introduction of Ecocash in 2011 – saw close to 11 million people using mobile money platforms, in a development that helped to address financial inclusion for the previously unbanked population. Mobile money has afforded the marginalized, the rural and the small-holder farming communities to be integrated into the country’s formal financial system and be able to contribute to the country’s fiscus through various taxes and levies.

The financial inclusion fostered by mobile money services ensures that the economically and geographically marginalized have access to the same financial products and services as the well-to-do and those who live in big cities, and that all sections of society have fair and equitable access to goods and services, including such services as personal insurance and basic healthcare.

Thomas Shekete, who runs a hardware and grocery shop in Muzarabani said it was essential for the government to encourage, rather than discourage, the use of mobile money as most people in rural areas now depended on their mobile phones for their daily transactions and livelihood.

“With the rate at which prices are going up, customers are now only buying a few things due to limits imposed on mobile money transactions and this is affecting our operations,” he said.

“If you check around this area, very few business owners have point-of-sale (POS) machines as only a few people have access to bank cards. We rely mostly on Ecocash for the bulk of our business,” Shekete added.

The cost of POS machines – which involves a forex component as they are imported – and the fact that relatively few people in the rural areas possess bank cards, makes their use and wide adoption much harder and more expensive than using mobile money.

Yet the crisis caused by mobile money transaction limits has now spread to several towns and cities, with most retailers and supermarkets now demanding payments for goods in US dollars and South African rands, putting further pressure on the local currency.–

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