A nearly cashless Zimbabwe tests the limits of mobile money

Imagine a world with no money.

Or don’t imagine it. Just go to Zimbabwe instead.

Here, grocery store cash registers still yawn open when a payment is processed, as if by instinct, but where cash should be there are only empty plastic slots. ATMs dot the city like relics of another era, their grey screens blinking a stream of apologies: Out of Order. No services available. We apologise for the inconvenience. Signs at gas stations, maternity hospitals, and even informal backyard bars implore customers to pay by EcoCash, a form of digital currency.

Zimbabwe isn’t totally out of cash, but it’s close. Ninety-six percent of financial transactions here are now done by electronic payments. Exchanges as small as buying a single tomato and as large as purchasing a car are largely completed using mobile money, a form of currency stored and exchanged via cellphone.  

Today, mobile money is a global phenomenon, with 168 million active accounts worldwide. But its epicenter and origin story is indisputably African. One hundred million of the world’s mobile money users are here. So is the world’s most successful mobile money company, and the industry’s pioneer, Kenya’s M-Pesa, which is today used by more than half the country’s population. And mobile money in Africa has also been revolutionary for another reason – it has brought tens of millions of people who have never had bank accounts into formal financial institutions for the first time.

But at the foundation of that digital money revolution is a kind of unspoken trust – that money put onto a cellphone can come back off it again, that numbers on a screen can, if needed, transform into old-fashioned stacks of bills.

And on that front, Zimbabwe is raising a new and urgent set of questions about the boundaries of the mobile money revolution. What happens when mobile money is the main money? Can digital money services – which bill themselves as the ultimate alternative to cash – actually survive in a place where there is practically no cash at all?

Noor Khamis/Reuters

A man holds up his mobile phone showing a M-Pesa mobile money transaction page at a market in Nairobi, Kenya on Dec. 31, 2014. Safaricom, Kenya's biggest telecoms firm, is a model of how mobile money can financially include millions of people with telephones but without access to traditional infrastructure such as banks.

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At 11:30 on a recent Monday night, Teacher Murombedzi tucked a pillow under one arm, a blanket under the other, and walked through the inky darkness of downtown Harare to his bank.

His goal was to get a good place in line so that he could withdraw $20 cash – the maximum daily limit – from his account when the bank opened at 8 a.m. the following morning. If he was lucky, he’d get it in bond notes, a Monopoly-like money that can only be used inside Zimbabwe, though ostensibly equal in value to a US dollar. If he was less lucky, the clerk would hand him the $20 in heavy bond coins. And if the young security guard was really unlucky, after 10 or more hours of queueing, he’d get nothing at all.

But as he spread his blanket on the cracked sidewalk and lay down to wait out the bracing winter night, he pushed that thought out of his head.

“It’s cheaper to live on cash,” he said. Mobile money “is just too expensive.”

That seems an odd thing to say, given that mobile money, supposedly, is just cash in a digital wallet. But in Zimbabwe, it’s no longer that simple.

Since 2009, the country has not had its own currency, but instead uses a mix of US dollars and South African rand, among others. Today, the dollar dominates.

Officially, every kind of dollar here has equal value – whether it’s a US greenback, a Zimbabwean reserve bank-backed “bond note,” or a digital dollar held in a mobile-money wallet. But in practice, that’s hardly the case. As Zimbabweans’ reliance on EcoCash grows, the fees mobile-money agents can charge customers to cash out tick up. And actual dollar bills – the only internationally recognized version of the currency in circulation – command a steep premium.

At a nearby clothing market, Mavis Magaramombe, like most traders, keeps three prices in her head for each of the pairs of shoes she has lined up in neat rows on a towel in front of her. The cheapest is the price in US dollars, though she can’t remember the last time someone paid her with those. Slightly more expensive is the price in bond notes, also rare. And the most expensive price – some 30 to 40 percent more than the price in dollars – is reserved for people who pay in EcoCash.

“I have to add that surcharge because that’s the same as what the money traders will charge me when I need to change into dollars,” she says.

To get $100 in US dollars on the black market, which Ms. Magaramombe needs to buy her wares over the border in Mozambique, she will need about $170 in EcoCash, or $135 in bond notes.

“As the economy gets worse, the rates are getting worse too,” says one black-market money trader, who asked not to be identified because of the illegality of his work. “The more of a shortage of hard cash there is in our banks, the more I can charge.”

Even EcoCash, the main mobile money provider here, admits openly that its product isn’t valued the same as dollars. “If you go anywhere, there is three-tiered pricing,” writes Eddie Chibi, the chief executive officer of Cassava Fintech Zimbabwe, the subsidiary of the cellphone company EcoNet that runs EcoCash, in an email to the Monitor.

Those drifting exchange rates signal, in part, how little trust Zimbabweans have in their financial institutions, says Naome Chakanya, an economist at the Labour and Economic Development Research Institute of Zimbabwe, a think tank in Harare.

And it’s not hard to understand why.

In the late 1990s and early 2000s, after then-president Robert Mugabe set into motion the forced confiscation of prosperous white-owned commercial farms, Zimbabwe’s economy tanked. To keep up with its bills, his government began printing money. By late 2008, runaway inflation meant that stores were changing their prices several times a day, and a carton of milk retailed for several trillion dollars. In November of that year, inflation hit 79.6 billion percent, and soon after, Zimbabwe swapped out its failed currency for American dollars, British pounds, and South African rand.

But for most Zimbabweans, it was too late. Their savings had been wiped out.

“So even though our currency became stable after that, people had totally lost faith in their financial institutions,” Ms. Chakanya says. “Now many people feel that if you deposit your money somewhere, there’s no guarantee you’ll ever get it back.” 

What little cash people did save, they began hoarding at home. Less and less stayed in circulation. Meanwhile, the broke government was spending far more importing staples than it earned in exports, drawing down its foreign currency reserves.

By 2016, the shortage of dollars – then the main currency in use – was so bad that the government decided to begin printing the now infamous bond notes.

“It drove a panic in the market,” says Easther Chigumira, a development consultant who wrote her PhD on Zimbabwe’s land reform program and its consequences. Soon people were hoarding bond notes too – fearful of what might happen if they handed them over to a bank – and so those began to disappear too.

All of that meant brisk business for EcoCash, the once-small mobile money arm of Zimbabwe’s main cellphone provider. Between 2014 and 2017, the number of Zimbabweans with access to “formal financial services” grew from 33 percent to 55 percent, according to the 2017 Global Findex. And most of that growth happened in the mobile money sector.

“EcoCash [has] been the hero in the whole scheme of things,” says Mr. Chibi, who runs EcoCash. Without it, he says, most Zimbabweans would simply have no other way to buy or sell things.

But many here say EcoCash has gouged them – though the costs are only partially the company’s doing. Most EcoCash agents, who cash out mobile money, now charge a stiff fee for their services, far above what EcoCash posts as its official tariffs. They say they have to – after all, they must buy the bills they sell to customers on the black market, too.

Many Zimbabweans feel they simply have no way out of the cycle. “As long as the government continues to consume more than it receives, and as long as we continue to under-produce, we’ll continue to have this cash crisis,” says Tinashe Kaduwo, an economist with Econometer Global Capital. “And as long as we have a cash crisis, we’ll always keep using this mobile money.”

But many speculate that mobile money will continue to lose value, which could in turn drive up prices in an already impoverished country.

Back in the bank queue, it’s now approaching 10 a.m., and Mr.  Murombedzi, whose eyes are dark from his poor night of sleep on the sidewalk, is near the front of the line. Just then, a woman walks by him.

As she passes, a purple $5 bond note flutters out of her pocket and drops on the sidewalk in front of him. He scoops it up and holds it for a few seconds in his palm, staring down at it.

Then he turns in the direction of the woman.

“Hey,” he yells towards her, “you dropped this.”