HomeOpinion & AnalysisFinTech, digital transformation in Zim’s informal economy

FinTech, digital transformation in Zim’s informal economy


“Go digital or go home”, is a common phrase on the street these days. In a 2021 article by Africom Perspectives on Digital Inclusion, Mastercard’s Imelda Ngunzu testifies on her first-hand experience of how digital payment solutions have transformed the lives of small business owners such as farmers.

Tinevimbo C Santu

She tells the story of a tea-trading organisation deep in western Uganda that was heavily reliant on cash transactions.

After migrating to a mobile money platform and being able to pay his farmers directly to their mobile money wallets in seconds, the general manager sent an email which read: “This is transformational, the farmers are asking if it’s witchcraft”. Such has been the impact of digitalisation in some communities and how people are awestruck on their first encounter with such life-changing experiences.

The rapid advancement and penetration of financial technology (FinTech) particularly mobile phone-based electronic money (mobile money) has completely transformed and continues to transform the financial services sector and the manner in which the public consumes financial services.

The adoption of and the extent of the penetration of FinTech especially by previously unbanked masses in the informal sector and rural demographics has exceeded expectations and revolutionised the financial services sector in sub-Saharan Africa.

In a region where having a bank account and having fixed telephone lines used to be status symbols, the mobile phone and the advent of mobile money brought financial services to the masses.

Mobile phone penetration in the region as measured by SIM connections according to 2019 statistics is 747 million SIM connections, representing 75% of the population (GSMA, 2019).

The Zimbabwean economy has gone through episodes of severe economic contraction which have largely decimated the formal business sector and left the economy largely informal.  According to a 2018 study by IMF on shadow economies around the world, Zimbabwe is the second largest informal economy in the world. About 60,1 % of Zimbabwe’s economy is informal and is second only to Bolivia which sits at 62,3%. Informal cross-border trading for example, has morphed from a fringe trading business that was associated with a small number of housewives in the late 1980s and early 90s to an economic mainstay supporting thousands of Zimbabwean households.

It used to be confined to a handful of women travelling to neighbouring countries such as South Africa, Namibia, Botswana etc to sell their wares and bring back goods for resale.

Cross-border traders now venture as far as China, Dubai and Turkey to buy merchandise for resale.

According to a 2017 FAO report on formalisation of informal trade in Africa, an estimated 5,7 million people in Zimbabwe are employed in the informal economy.

Despite the challenges currently being experienced in the country, Zimbabwe has witnessed a fair share of FinTech growth in several areas, especially in insurance, payments and trading including the revolution in cryptocurrency.

However, while the FinTech revolution being experienced in most countries is set within normal conditions associated with formal economies, the Zimbabwean scenario is an interesting one.

The setting in Zimbabwe is characterised by an economy that has grown in reverse and moved away from the formality associated with most economies.

Financial systems are traditionally very formal in nature and the largely informal nature of the Zimbabwean economy means that a traditional formal financial system may not sit well in such an environment and may fail to properly service such an economy.

Traditional lending institutions such as banks largely exclude informal business operators but these informal businesses constitute the majority of business operations in the country.

Informal operators who are not eligible to access bank loans resort to microfinance institutions for loans. Mobile money products have interestingly resonated exceedingly well with end-users in Zimbabwe’s largely informal economy.

Probably driven by a range of factors, including the macroeconomic situation, cash shortages and aggressive marketing by Econet, the volume of digital payments grew from 38 million in 2012 to 367 million in 2016, and then accelerated to 1,96 billion in 2018. Traditional banking products have never achieved anything remotely near such penetration levels.

The Zimbabwe FinTech Ecosystem Study (2020) report indicates that EcoCash virtually has a monopoly position in the mobile money market. According to Potraz, as at year end of 2018 there were 6,35 million active mobile money subscribers in Zimbabwe, of which over 95% were on the EcoCash platform.

The report also highlights that the RTGS settlement system (generally used by larger entities and individuals for higher value transactions) accounts for the highest value of payments, however, mobile money transactions are catching up fast. Between 2016 and 2018, while the aggregate value of RTGS transactions increased by 72%, the total value of mobile money transactions increased by 628%.

The Zimbabwe FinTech Ecosystem Study (2020) also provides a snapshot of the current FinTech environment in Zimbabwe which shows that FinTech is still in its infancy and there is a lot of untapped potential.

In Zimbabwe, banks have generally been slow to embrace FinTech with probably the exception of Steward Bank which seems well on the path of becoming the country’s first digital bank.

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