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Xmas rush exposes banks

by Staff reporter
01 Jan 2021 at 07:39hrs | Views
A STEEP rise in demand for liquid cash experienced during the Christmas period exposed weaknesses in Zimbabwe's electric money strategy, a NewsDay Business survey revealed.

Clients said electronic money transfers were be difficult to depend on in some parts of the country where telecoms networks were poor and retailers did not have the
gadgets used for digital payments.

The Reserve Bank of Zimbabwe, along with individual financial institutions had in the past four years scaled up a campaign to encourage the market to skirt a gruelling cash crisis by switching to electronic money.

Under the strategy unveiled in March 2016, financial institutions have been encouraging clients to purchase goods using bank cards, mobile money transfer platforms like EcoCash and OneMoney, along with several other methods that have been developed in the past few years.

But based on last week's developments, bank clients still face problems using electronic money in some parts of the country, and cannot access cash when the need arises.
During normal times, these platforms transmit in over 90% of payments made in Zimbabwe.

NewsDay Business' survey last week showed that all major banking halls in Harare's central business district were clogged with depositors who were battling to make last minute cash withdrawals before travelling for the Christmas holiday.

Depositors said most of these payment methods only worked in towns and cities.

"I was here by 4:30am and my intention was to be the first to join the queue," said Samson Mutize, who hoped to withdraw cash from the bank before travelling to his village.

"But upon arrival, I was shocked to see that there were over 100 people who arrived earlier than me.

"The queue is not moving as fast as I thought it would do," Muzite told said outside a banking hall.

Asked why he was withdrawing cash, instead of taking advantage of the flourishing electronic funds transfer platforms, Mutize said in the villages, most of his needs would require him to carry liquid cash.

"I need cash to transact during the holidays," he said.

"At my rural area there is no network to transact using bank cards or any form of plastic money.

"In addition, transport and shop owners prefer cash. They don't accept plastic money," he said.

Cash shortages have been a key feature of Zimbabwe's economy in the past five years.

While authorities have promised to address the crisis, there has been little change in banking halls.

During periods of high demand like the Christmas holiday, many depositors take the risk of sleeping in bank queues to access cash.

Economist, Victor Bhoroma, said while plastic money has been well embraced in Zimbabwe with over 95% of local transactions being done using digital payment methods, transport operators demand United States dollars or Zimbabwe dollar notes.

"This increases pressure on the traveling public to access cash from the bank and be cushioned on the journey," Bhoroma said.

"This emanates from the multi-tier pricing that exists in the market. Mobile money (RTGS) prices are not equal to US dollar cash or Zimbabwe dollar cash," he said.

"However our cash to bank deposits ratio is slightly on the lower side," Bhoroma said. Analysts say the cash crisis affects citizens' ability to transact and dents their confidence in the banking sector.

Source - newsday