The Reserve Bank of Zimbabwe (RBZ) has accused mobile money platform EcoCash of playing a role in the rapid devaluation of the country’s currency, and characterizing it as a “Ponzi scheme” in court documents. This about-face comes after the RBZ recently released figures showing that mobile money transfers made up the bulk of Zimbabwe’s National Payment System, the financial mechanism used by the Reserve Bank to manage commercial and financial transactions.
With more than 11 million users, EcoCash is the dominant phone-based money transfer system in Zimbabwe.
This has not stopped regulators from alleging that EcoCash has been committing illegal currency dealings by allowing its agents to have an overdraft on their EcoCash accounts, funds the bank believes are used to buy foreign currency and artificially inflate the exchange rate.
Zimbabwe’s financial woes are compounded by international sanctions.
Millions of Zimbabweans have come to depend on mobile money wallets to handle not only digital payments but also salaries and remittances. The convenience of digital cash has made it popular in the country’s informal economy sector—the largest in Africa and second-largest in the world—but it also comes with its own set of risks, namely the difficulty in acquiring hard currency due to exorbitant commissions charged by these mobile money platforms.
Even before the COVID-19 pandemic, Zimbabwe’s financial woes are compounded by a famine in the north threatening millions and international sanctions. African Union chair Cyril Ramaphosa has been urging the G20, the International Monetary Fund, and the World Bank to lift sanctions on Zimbabwe to help the nation deal with the pandemic.