Finance and Economic Planning Minister Patrick Chinamasa last week told Parliament that Zimbabweans had embraced electronic platforms as means of transacting, with 96 percent of transactions now being conducted electronically.
Although this information is not new, as Reserve Bank of Zimbabwe governor Dr John Mangudya had already disclosed the figures in his 2018 Monetary Policy Statement earlier in the year, there is need to adopt a cautious approach in embracing its full adoption given where we are and the challenges the rest of the world is facing in efforts to become cashless societies.
According to Minister Chinamasa the move to become a cashless society is the right move, whether the country is developed or not developed.
“The way to go Mr Speaker Sir, developed country or not developed is that we are moving towards a cashless society and the challenges we have met because of cash shortages have expedited the movement of our people towards a cashless society to the extent that of the $97 billion transactions that have been transacted in the this country, 96 percent of them are electronic,” Minister Chinamasa told Parliament.
There are, however, several concerns with regards that position. If 96 percent of the country’s transactions are being conducted electronically
what does this mean for the generality of the population given that in 2014 only 69 percent of the population
could access affordable and appropriate formal financial services within the country?
This is also at a time banked adults are below 60 percent with the RBZ only targeting to get to those levels by 2020. Now that the bulk of transactions are being conducted on a platform that many, especially those in the rural areas do not have access to, is it something that we should be celebrating and embracing?
Although arguments have been put forward that the advent of mobile money has accelerated financial inclusion in the country, reality on the ground reveals otherwise, as some areas, such as Makonde, which is 150km northwest of Harare still struggles with accessing mobile network.
One big area of concern is that of smaller merchants in rural areas where perhaps the telecom systems are not working. For example at one of the shopping centres in Makonde if one wants to make a purchase through mobile money, one will have to walk more than a kilometre away from the shopping centre, to the nearby school, where network can only be accessed next to one of the teachers’ houses.
Given such network challenges, how many are being excluded from transacting?
While there are many benefits to removing cash from the economy, such as eliminating black markets we also have to ask whether the cashless society will cater for the needs of special interest groups, namely Micro, Small to Medium Enterprises (MSME), the rural and the small-scale agricultural communities. Of the 96 percent that has gone through electronic means, what is the portion from the marginalised groups and what was it before that?
Are there no gaps that still exist in the level of access, usage and quality of financial products and services? What is the impact of using electronic means to transact in the lives of those consuming the products and services? Are the electronic systems inclusive enough? These are key questions that the authorities should be able to answer or address.
There is thus need for the authorities to be cautious in advocating for a cashless society just as much as the Reserve Bank of Zimbabwe has been cautious in legalising cryptocurrencies, a phenomenon which it is not yet ready to regulate.
The country has to take notes from early adopters of cashless societies such as Sweden, where despite attaining some level of success, have not managed to convince its citizens to fully accept the limited use of cash. Seven out of ten still want some transactions to be conducted using cash.
At 96 percent, Zimbabwe is already ahead of Sweden at 85 percent in terms of cashless transactions. It’s even much higher when compared to an EU average of 51 percent and 68 percent in the UK.
While there is nothing wrong in the country leading the world in advancing developments, there is need to strike a balance with issues of sustainability and inclusiveness. This, however, seems not to be the case in Zimbabwe.
While Sweden’s increased use of digital payments has received plenty of global hype, and is frequently flagged as an example of the Nordic nation’s innovation, there are growing concerns about the pace of change.
Despite Sweden having been reported to be winning the race towards becoming the world’s first completely cashless society, there are also growing concerns it’s causing problems for the elderly and other vulnerable groups. Just like what we have highlighted above, there are also concerns in Sweden that the push towards a cashless society provides a challenge to vulnerable groups, especially the elderly, here in Zimbabwe it’s the rural folks.
One can imagine how difficult it could be for a 70-year-old granny to try and transact through these systems, will there be people to hand hold them conduct electronic transactions all the time? Even if they are, how safe would it be to ask for help from strangers?
The cashless trend is also making life more expensive for the transacting public and one can only look at what financial institutions are making to know that wealth is being transferred from the poor to the rich. Mobile and electronic transaction should be an optional convenience and not the only option.
So before we find comfort in the growing use of electronic transactions, the RBZ might want to take a cue from Sweden’s central bank, the Riksbank, which has adopted a more cautious tone.
In its annual report released in February 2018, it said that while transformation of the nation’s payments infrastructure was “essentially positive”, it needed to take place “at a rate that does not create problems for certain social groups or exclude anyone from the payment market”. Like any technological revolution, it’ll be the small details that hold things up.