EcoCash Shows Dangers Of Early Trust On It

0
57
Ecocash

According to the IMF, 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, the country’s leading mobile phone operator with over 6,3 million active subscribers.

EcoCash managed to gain the biggest market share in the sector due to its ability to extend financial inclusion by drawing in previously unbanked customers. But the current power blackouts and food shortages in the context of a currency crisis are now showing the fragility of that model.

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

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.

  • Piers Pigou, senior consultant for southern Africa with the International Crisis Group, says that massive reliance on EcoCash has been “visibly shaken by a compromised infrastructure and power supply.”
  • The use of alternative power supplies, such as diesel generators, to keep the network running is unsustainable, while installing solar options is costly and will take time, he says.
  • Pigou has repeatedly heard complaints that the EcoCash fee structure has exploited a situation that has left Zimbabweans with “no feasible alternative either in terms of securing physical cash or alternative electronic services.”

Mobile money and food shortages

According to the Famine Early Warning Systems Network (FEWS) in August, food supplies across Zimbabwe are now significantly below average, especially for maize grain. Mobile money is doing little to improve access to food, with mobile money prices up to 40% higher than cash prices.

  • FEWS says that in parts of Zimbabwe, the 2018/19 rainfall season was among the worst on record.
  • Cash shortages have prompted an increase in the use of mobile money transfers for payments.

And mobile money is worsening rather than improving matters: “the high and increasing service charges imposed by retailers, traders, and service providers are further eroding household purchasing power.”

  • In some cases, FEWS says, poor households are resorting to bartering for food.

John BaRoss is the founder of Finnclude, a non-profit grouping of financial services professionals which aims to promote financial inclusion. He says that EcoCash’s woes show that it’s “premature to push any population” into going totally cashless due to the ongoing risk of power interruptions.

-theafricareport

LEAVE A REPLY

Please enter your comment!
Please enter your name here