Mobile financial services are, in most African countries, born out of crises. In 2011, Zimbabwe had gone through a volatile decade of economic crises – hyperinflation, currency instability and a collapse of the formal financial system. Consumers, mostly employed in the informal sector, had a widespread mistrust of the formal banking system. In came Econet, a major mobile operator, to launch a mobile money service called Ecocash. Taking advantage of the country’s high mobile penetration, the service had 2.3 million users within 18 months. Today, close to 90% of adult Zimbabweans use Ecocash. In addition, Ecocash paved the way for competitors such as OneMoney, Telecash and Mycash. An important use of mobile money is to store money securely in high crime areas. An important benefit is the cash-in and cash-out functionality. This allows users to deposit cash into a mobile account through a mobile money agent and withdraw physical cash at a convenient time and place. They can avoid the long queues and withdrawal limits set by the formal banking system. Despite the compelling value proposition that mobile money offers, the Reserve Bank of Zimbabwe recently placed significant regulatory restrictions on its operations. The regulator said mobile money services were fuelling illegal foreign currency exchange, money laundering and fraud, especially through the cash-in/cash-out service.
SOURCE: THE CONVERSATION