Tuesday
September 10
2019

Zimbabwe’s EcoCash Woes Show Dangers of Early Reliance on Mobile Money

By David Whitehouse

Mobile money is not showing up at the crisis facing Zimbabwe.

The country, which according to the IMF has the second-largest informal economy in the world behind only Bolivia, seems like an ideal test-bed for mobile money. In the fourth quarter of 2018, mobile money was used for 85% of all retail transactions in Zimbabwe. EcoCash, a subsidiary of EcoNet Wireless, the country’s leading mobile phone operator, is the dominant provider.

The growth of EcoCash was driven by its ability to extend financial inclusion by drawing in previously unbanked customers.

But recurrent power blackouts and food shortages in the context of a currency crisis are now showing the fragility of that model.

During blackouts, mobile operators need to resort to backup power generators, which makes their services much more expensive to provide. High transaction fees and a government tax all increase the difficulties facing users.

Photo courtesy of Kay McGowan / USAID.

Source: The Africa Report (link opens in a new window)

Categories
Finance
Tags
financial inclusion, financial services, fintech, mobile money, unbanked