Once again, the Zimbabwe Reserve Bank (ZRB) is blaming the nation’s mobile money operators for its failing currency. The country’s central bank has recently issued a directive for market leader EcoCash and its other competition, One Money to disconnect the lines of its agents that transact up to $2000 monthly.
The agents are all alleged to be involved in black market dealings.
According to the regulator, EcoCash with over 11 million users and 95% of the market share, has increasingly engaged in illegal currency dealings across the country with its agents. While Zimbabwe’s official exchange rate is $1 to 25 Zim dollars, black-market dealings see the rate go up by almost 100% at $1 to 45 Zim dollars.
This high rate on the black market is alleged to be a major factor in the devaluation of the Zimbabwean dollar against its US dollar benchmark on the parallel market.
In Nigeria however, parallel market dealing is not an issue. So unless there is an economic reform that changes the way the Central Bank of Nigeria operates or the government sees a problem in it, startups like Piggyvest that lets users purchase dollars at parallel market price are in no danger.
Nonetheless, this is a sharp turnaround for the solution which has been hailed by Zimbabwean authorities as a saviour. Beyond being an enabler for financial inclusion, mobile money has also kept financial transactions active as banks have closed following the COVID-19 pandemic.
The Econet owned operator, EcoCash has abided by the directives and has closed lines of agents in the stipulated category. For the disconnected agents, they will need to re-apply and re-register and the regulator will oversee the process.
However, the mobile money operator has taken the central bank to court to set aside the freeze on agent lines. According to the operator, this has massively impacted its business, since these agents will not have access to their floats to transact.
In response, the central bank has filed papers describing the mobile money operator as a ‘Ponzi scheme’. This is as the company is said to be running overdrafts for the agent lines, with some agents having as much as $39 million in excess on their EcoCash accounts.
In September last year, the ZRB also placed a ban on mobile money transactions in the country as it tried to contain the economic crisis.
With the country dealing with cash shortages, the regulator had claimed that mobile money operators were capitalizing on that to charge higher rates on its cash in and cash-out transactions – as much as 50% on transactions.
Although the ban was reversed 3 days later following social media outrage and a court order, the premium was driven down to make it more affordable.