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MasterCard talks Zimbabwe’s remittance market and the role of mobile money

Zimbabwe’s Steward Bank has recently partnered with MasterCard to allow the bank’s customers to receive funds from friends and family abroad through the HomeSend global network. HomeSend is a joint venture between MasterCard, eServGlobal and BICS.

Steward Bank has around 1.5 million customers, and the bank’s connection to HomeSend is aimed at assisting with cashless remittance transfers to Zimbabwe. It is estimated that remittances received via formal transfers alone accounted for about US$1.8bn in 2013.

Steward Bank’s mobile payments solution, EcoCash, will also connect to HomeSend. This partnership will allow EcoCash’s mobile money customers (over four million) to receive remittances directly into their mobile money wallets.

How we made it in Africa asks Charlton Goredema, MasterCard’s vice president and area business head for southern Africa and emerging markets – to explain the role remittances play in Zimbabwe today, and the potential mobile money has in streamlining these transfers.

What role does remittances and the diaspora play in Zimbabwe’s economy today? 

Remittances, otherwise known as money transfers, are big business in Zimbabwe. So much so that about four million Zimbabweans in the diaspora are sending about $1.8bn to their loved ones back home. Given estimates that Zimbabwe’s GDP was about $13.5bn in 2013, remittances received through formal channels alone contributed about 13% to the country’s GDP. Of course, that does not account for cash sent via informal channels, like people travelling over the border carrying currency with them.

While this illustrates the strong and long-lasting ties Zimbabwean immigrants have to their home country, it also highlights the importance of making this process quick and efficient for senders and providing families back home with easy and convenient access to funds.

Unlike funds channelled into a country via international aid, remittances go directly to households. They provide a financial lifeline for individuals and families for their daily needs, as well as a source of funds for agriculture, investments, medical wellbeing and education.

Remittances are also an important source of private inflows to developing countries, helping them mitigate the risks of economic shocks. In fact, governments across sub-Saharan Africa are pushing for greater efficiency in cross-border remittance transfers, and broader use of electronic payments can help them achieve this objective. This is because cash contributes to the grey economy, and when you add governments’ costs to print and deliver money, to cash handling costs incurred by banks and merchants, and opportunity costs for consumers like travel and wait time at branches, the cost of cash rises to anywhere between 0.5% to 1.5% of GDP, depending on the country.

What challenges do members of the diaspora face with sending money home?

There are currently challenges faced by both those sending money home, and those receiving it – via formal or informal channels.

A World Bank study found that sending money to Africa remains higher than the global average – in 2014, [average] costs were around 11% to send to Africa compared to the 8% global average. That’s enormous for anyone to pay, let alone people who are living in poverty.

The millions of Zimbabweans living in South Africa regularly make transfers in cash back to Zimbabwe using taxis, buses, friends and even couriers at very high risk. Funds delivered via cash carried over the border opens the carrier to theft, loss and corruption, with the horrible risk that the recipient gets little or none of the funds intended for them. Then, recipients face challenging conditions such as long queues, or expensive informal cash transfers.

How does this partnership between Steward Bank and MasterCard hope to ease these challenges?

The key to lowering both these costs and risks is increased competition between, and broad access to, formal transfer channels exactly like HomeSend. Considering that 40% of global remittances are sent to rural areas where distribution networks are often poor, electronic solutions become even more critical.

By digitising and formalising remittance payments, HomeSend (from MasterCard) with their partners Steward Bank and EcoCash in Zimbabwe are ensuring that Zimbabweans receive funds as intended, in full and on time. This means they have money available to pay bills quickly and easily, purchase additional airtime minutes or pay for goods using their digital funds, all via their Steward Bank accounts. And soon via their EcoCash wallets and MasterCard companion debit cards too.

Describe the role mobile money currently plays in the country, and how this will affect cross-border remittances?

The explosion of mobile devices is bringing about financial empowerment with mobile phone penetration expected to reach nearly 80% in sub-Saharan Africa by 2020, making mobile money transfers more prevalent. In Zimbabwe, the latest figures released by the Postal and Telecommunications Regulatory Authority of Zimbabwe indicate 11.4 million active mobile subscribers at the end of 2014’s third quarter.

According to the State of the Industry 2013: mobile financial services for the unbanked report, published by GSMA, Zimbabwe is one of at least nine markets that already have more registered mobile money accounts than bank accounts.

This is not surprising given the context in the country – frequent shortages of physical currency in the years since introducing the US dollar, and a high percentage of financial exclusion particularly in rural areas.

The technology of mobile money allows for the digital conversion of cash to electronic value (“e-money”). Customers using mobile money can shift cash transactions, such as payments or transfers, into a digital ecosystem that is more secure, more convenient and more affordable than cash operations.

For EcoCash, offering domestic person-to-person money transfer services is just the first step towards a much bigger goal: becoming the dominant payment system in Zimbabwe for the banked and unbanked alike. In July 2014, EcoCash unveiled its MasterCard mobile money companion Debit card in Zimbabwe.

This is the first time that physical MasterCard debit cards are available to people using mobile money services in Africa, and is the largest rollout of secure EMV Chip and PIN payment cards in Zimbabwe to date.

The companion debit card closes the gap between mobile money and formal financial services by providing secure, convenient access to ATM withdrawals and electronic payments at retailers across the country, and globally wherever MasterCard is accepted.

Very soon, HomeSend will enable four million EcoCash subscribers in Zimbabwe to receive funds from abroad directly into their EcoCash wallets and MasterCard companion debit cards, with no need to open a formal bank account.

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