Digital finance systems foster macro-economic health globally: ZIMCODD

The Zimbabwe Coalition od Debt and Development (ZIMCODD) has underscored the fact that digital finance systems are playing an increasing role in macro-economic health globally.

The statement came after the government had given a Press Release on the Suspension of Monetary Transactions on Mobile Based Money Platforms (One Money, MyCash, Ecocash, and Telecash) dated 26 June 2020.

The Reserve Bank of Zimbabwe, later on, advised the public that all mobile money agents are suspended from facilitating mobile financial transactions with immediate effect; all merchant transactions are suspended except for receiving payments for goods and services as well as payment of utilities (water, power, and airtime), which have been limited up to ZW$5000 per day for the convenience of the transacting public; and that mobile money liquidations should be done through the banking system.

The RBZ added that all bulk payer transactions have been suspended with immediate effect.

“These unprecedented measures have been necessitated by the need to protect consumers on mobile money platforms which have been abused by unscrupulous and nonpartisan individuals and entities to create instability and inefficiencies in the economy. Members of the public are assured that their bonafide transactions will be processed normally,” read a part of the RBZ statement.

ZIMCODD said it is alive to the fact that the Reserve Bank is worried that the proliferation of digital economies, currencies, and transactions will erode already fragile banking systems and by extension render ineffective the monetary policies which rely on them and erodes the efficacy of the two basic tools governments have in their arsenals for combating inflation: controlling the money supply and setting interest rates.

The Central Bank (Reserve Bank of Zimbabwe [RBZ]) has used the National Payment System Act as well as internally developed policy guidelines to regulate mobile financial services.

ZIMCODD argued that the major shortfalls of the current regulatory framework include lack of clarity on how overlaps and conflicts of regulators and players are addressed, limitation of products, the question of legality, and non-enforceability of some frameworks and lack of emphasis on financial inclusion.

“It is worrying that the government’s measure comes in the context of COVID-19 pandemic where banks and other financial institutions are going paperless and encouraging social distancing to stop the spread in compliance with World Health Organisation (WHO) standards,” ZIMCODD said.

Policy inconsistency

Less than a year ago, monetary authorities were on overdrive encouraging the use of electronic money. The banks are already cash strapped and mobile money has become part of people’s daily transacting means for all kinds of essentials reducing demand for cash withdrawals in the bank. The measure announced by the bank will take us several steps backwards and also erodes public trust in both current and future policy prescriptions. There must be some degree of predictability in the policy environment.

ZIMCODD argued that urban to rural remittances will be significantly affected especially given the COVID-19 context which has necessitated lockdown measures as enunciated by President E.D Mnangagwa limiting movements (including intercity) to stop the spread of coronavirus. Many
Zimbabweans have rural dependants that include children and the old aged.

To this end, suspending mobile money platforms without offering a sustainable and affordable alternative will render beneficiary families, members, to hunger and starvation.

For the record, ZIMCODD argued that it is not against the regulation of mobile money platforms. However, it said the regulatory policy should be executed in a people-centred and considerate manner.

The coalition said the measure is poised to worsen material conditions of the poorest of the poor, even alienating them from the ray of hope they have in terms of livelihood support from distant family members, relatives and friends as well as from humanitarian organisations and social welfare department providing support through harmonised cash transfer programme.

Mobile money platforms have played a crucial role in providing relief support in humanitarian crisis and disaster situations – noting that Zimbabwe faces multiple crises of health, food, and economic nature, the announced measure is therefore untimely.

ZIMCODD said the government, through the Ministry of Finance and Economic Development, should be concerned about domestic resource mobilisation to fund treasury’s fiscal obligations.

Zimbabwe has the world’s second-largest informal economy that is characterised by nonformal banking hence limited money circulation in the banking sector. Instead of adopting punitive measures, the government should not lose sight of the revenue collection value of phone-based mobile money transactions ensuring that citizens pay their fair share of tax.

ZIMCODD said tempering with the resource mobilisation base at this critical juncture of economic decline undermines revenue collection and creates huge budget deficits.

Recent research demonstrates that there is a strong link between remittances and mobile money adoption. Most countries that have a higher level of remittances exhibit higher levels of mobile money adoption. It is a fact that most Zimbabwean households are surviving on diaspora remittances before, during, and after the lockdown owing to economic depression.

The ZIMCODD is therefore calling upon the government to:

. Urgently reconsider and revise the pronounced measure;
• Make a resolve for the enactment of the Electronic Money Act which regulates mobile financial services;
• Keep abreast with innovation and proactiveness of the regulators in coming up with suitable regulation matching new innovations;
• Harmonization of the regulation to address the potential conflict between regulators and individual institutions;
• Channel efforts towards addressing a flawed economic model that promotes under dealings by a few elites and politically exposed persons fuelling the parallel economy; and
• Arrest and prosecute the said ‘economic saboteurs’ since there is a claim of “impeccable evidence” instead of punishing innocent citizens already suffering from the economic meltdown.