The EcoCash Save savings facility allows ordinary people to save as little as a dollar, with a monthly interest of four percent, and to conduct normal business transactions in a similar way to services offered by conventional banking systems.
The difference is that the new system is based on a mobile phone system and works in rural, informal and urban settings at the depositor’s convenience.
A survey by The Zimbabwean showed that most people, especially those in the informal sector, who are normally turned away from conventional banks, have welcomed the product with open arms.
The informal sector has become a dominant economic player contributing nearly 20 percent, or $1.73 billion, to the country’s gross domestic product, says the Zimbabwe Statistical Service.
Only a tiny fraction of the 3,7 million people who are active in the sector use the formal banking system, either in their transactions or for business growth. One vendor, Modina Chikato said the new service would pose a formidable challenge to the formal banking sector, which had never made any attempt to assist the poor.
EcoCash Save offers a mobile savings account for subscribers in addition to the existing popular EcoCash system. EcoCash, a virtual money transfer facility, has seen the company process transactions running into millions of dollars in its first year. With 7,000 agents covering the whole country, the system – known as E- wallet – enables users to pay their utility bills, transfer and receive cash, and buy and sell most goods and services, including public transport and air fares.
The new facility is an extension of the original system. “The uptake of this is going to be huge. We have been side-lined from the mainstream economic activities for too long,” said Chikato, explaining how it had been impossible for her to open a bank account in the past.
“They wanted salary pay slips and we do not have them; yet we earn more than $300 a month from selling our wares. Now, we do not have time to stand in bank queues, so this is a very positive development for us,” she said.
Furthermore, banks normally demanded a certain amount of money upfront before an account can start working. By so doing, the formal sector has shut out the majority who eke their living on “small dollar” earnings.
Economists estimate that Mbare Musika, Zimbabwe’s largest informal market, handles more than $1 million, outside the formal sector, every day. Douglas Hangara, a vendor at Mbare’s Mupedzanhamo market, explained how traders would lend each other their daily profits as a form of savings. “We called it a ‘round’, meaning that we give each other a certain amount of money daily,” he said. “This facility will just make it so easy for us now to keep our surplus income safe.”
Academic Greg Lennington said the new product, as a mobile bank account, would help revive a savings culture. “Experience has shown that the majority of Zimbabweans no longer trust banks,” he said.
Low interest rates, political uncertainty, lack of security in the banking sector and possibility of a return of the discredited Zimbabwe dollar have all pushed most people to keep their earnings outside the formal system.
“It is always a worry when there is a possibility that banks could be indigenised,” he said. “Consumers want a guarantee that they are not going to wake up to be told that their foreign currency savings have been converted to local currency – as has happened here in the past.”
Another vendor, Tarisai Manhambo, said banks lost the plot when they started to impose an interest charge on depositors’ savings. That was a discouragement that pushed many out of the formal savings culture. “The idea of waiting in a queue to make a transaction, and being charged interest on the little I put in, makes me hate having my money in (a formal, institutional) bank account.
I like the idea that I can deposit and withdraw my money from anywhere and anytime just as long as there is an EcoCash agent,” she said. Ecocash Chief Executive Officer, Cuthbert Tembedza, said the facility was available to the millions of people previously deemed to have amounts considered too small by conventional banks.
Shadrech Mushonga from Glen View in Harare said since no bank would allow for a savings account with only a dollar in it, the new service was most welcome as it enabled the poor to save whatever amount they can, and at their convenience. “It is convenient especially for the women because, as you know, women are very good at saving money.
The challenge was that they could not go to the bank daily to save their money so they were saving their money in these community clubs,” he said.
Tryphine Chikomo from Budiriro in Harare questioned whether the safety of the savings account was guaranteed considering that there are people who are very good at snatching people’ handsets. “What happens when I lose my phone? I may end up losing all my year’s savings so yes, it is convenient but for security reasons, I am yet to reach my conclusion,” she said.
Tembedza assured users that the facility was as secure as any normal banking system that relies on a personal identification code. If one loses their phone through theft, that does not automatically mean a loss of what is either in the E-wallet or in the new savings account.Post published in: News