Developing the local fintech industry
FINANCIAL technology (fintech) refers to the use of the latest technologies to provide financial services to individuals and businesses, that are in need of the convenience, which the technology provides.
It can be used to make local payments, send cash domestically or internationally, offer credit, access insurance products, and so forth.
A major advantage leading to its rapid adoption by financial organisations and customers is that it typically reduces costs on both ends (for the fintech company and the customer), whilst it enables most transactions to occur quicker than traditional financial methods would possibly do.
In order to benefit from the mentioned advantages, traditional financial institutions (banks, insurance companies, etc) also buy the fintech companies or collaborate with them, time and again, as they incorporate technology into more of their products and services.
The digital banking platforms of major banks are a good example of financial technology. Examples of companies, which specialise in fintech within Zimbabwe are: Zimswitch, various Cassava Smarttech firms (Ecocash, Ecosure, etc) and Onemoney, Sendittoo (remittances).
They also include Bereka (remittances), Mukuru, Thumeza, Inclusive Financial Services (a micro-credit institution focusing on SMES), C-trade (which provides for digital purchases of stocks on the Zimbabwe Stock Exchange (ZSE) and bonds on Finsec), Harare Receivables Exchange and Payitup, among others.
Zimbabwe's fintech landscape
As of February 2024, international research firm, Tracxn reported that there were up to 62 fintech-focused companies in Zimbabwe, some of which were mentioned earlier.
The shortage of local-currency bank notes (bond notes) at banks has driven Zimbabweans to quickly adopt fintech, such that the country is a leader in this field, when compared to other advanced countries.
For example, more than half of the adult population in Zimbabwe are active mobile money subscribers, using services such as Ecocash and Onemoney, to make payments or send cash within the country.
By the end of 2018, for instance, there were as much as 6,35 million, active mobile money subscribers. This compares just as good, or slightly better, than South Africa, which expects to have just over half of its population using digital payments by 2027.
Mentioning South Africa is of great relevance since it is the most advanced economy on the continent. Moreover, South Africa has a highly respected fintech sector, which accounts for as much as 40% of all fintech revenue attributed to Africa.
Therefore, if Zimbabwe is doing comparably well, in relation to South Africa, this shows just how developed the local fintech sector is.
Understanding that Zimbabwe is a leader in financial technology is crucial in order to re-focus local policy-makers and fintech companies, so that they utilise their competitive advantage for national development.
Some of the notable domestic fintech companies and their respective services are explained below:
Ecocash provides a means for locals to make digital payments using mobile money. As of 2018, Ecocash had 95% market share in the mobile money segment. It is also a very profitable company.
In the insurance space, Ecocash's sister company, Ecosure, provides short and long-term insurance products for the Zimbabwean market. Their products include Ecosure funeral policy, hospital cash payment insurance, personal accident insurance and Ecosure Moovah, which provides motor vehicle insurance.
There is also a fintech-focused insurance company called Nhakalife, which provides accident and funeral insurance.
For customers in need of efficient and lenient fintech-facilitated loans, they can be accessible through various traditional banks by simply making use of a USSD code on one's cell phone.
For example, Steward Bank enables its clients to get loans by dialling *236#. This facility is, however, meant for very small amounts, also known as nano loans.
Accordingly, several other traditional banks have embraced this technology and also provide loans through basic cell phone prompts (USSD code).
A company named, Inclusive Financial Systems, was also reported to be developing a platform called "Makosystems", aimed at issuing small loans to small to medium enterprises (SMES), through fintech.
The company was raising as much as, US$1,5 million for lending to the SMES, as reported in a fintech study report by FSD Zimbabwe, in 2020.
Harare Receivables Exchange, established in 2012, was also reported to be working on fintech-administrated “invoice-discounting”. The invoice discounting was targeted at SMES awaiting payments from their customers.
In the arrangement, any SMES awaiting payments from reputable large companies would be able to access cash from the receivables exchange, if they (the SMES) happened to be in need.
They would get slightly-less than the full amount, which they were to get from their customers (large companies) at a later date, whilst the receivables exchange gets the full amount, making a profit in the process.
In other words, the receivables exchange would provide the SMES with cash, on the spot, and then receive the payments that were due to them (SMES) from their customers at a later date.
This was noted to be a timely and innovative fintech product, as the domestic receivables market was estimated to be worth US$2,3 billion per year, back in 2020.
A fintech company named Youfarm was also reported to be targeting the provision of small loans to farmers who do not have enough fuel or funds to pay for logistics to get to their respective markets.
In the remittances space, there are Western Union, World Remit, Mukuru, Shumba Money and Hello Paisa, which are among the most popular. The more innovative ones include Bereka and Sendittoo, which both make deliveries of remittance payments to the homes or offices of recipients (of remittances), saving them time and providing convenience.
There is also C-trade, which enables the buying and selling of stocks on the Zimbabwe and Victoria Falls Stock Exchanges, from the convenience of one's cell phone.
The company also provides a facility for the purchase and sale of bonds and other money market products.
Cryptocurrency transactions used to be popular around 2016, although in 2018, the RBZ declared them illegal in Zimbabwe.
Opportunities for growth
Since Zimbabwe is a leader in fintech innovations, it is advisable for the government to encourage local companies to expand their operations to foreign countries.
South Africa, Nigeria, Kenya, Algeria and Morocco, for example, offer lucrative regional markets. It will also be commendable if the local companies develop products for overseas markets, such as the United States of America and Europe, as well.
This will earn the country foreign exchange, through any repatriated profits and other revenues. Such moves will be crucial because the local market has smaller customer numbers and lower disposable incomes.
Zimbabwe's collateral (asset) registry will also need to include cattle and other forms of assets owned by villagers and SMES. This will enable the issuance of higher-value loans to villagers and SMES.
Villagers, SME owners, small scale miners and small-holder farmers should be able to pledge goods of smaller value such as cattle, inexpensive equipment, minerals or the previous year's harvest (if stored), as collateral for small loans from fintech companies.
This will be a noble move because new job roles for urban and rural citizens will be created, through the formation and management of such collateral registries.
The ability of the aforementioned small economic participants to improve their liquidity positions through small loans of a higher value will enable them to be more productive.
Some of them (villagers, SME owners, small holder miners and farmers) will ultimately be able to develop larger formal businesses or powerful export companies, through such loans.
In order to nurture more talent in computer programming and data analytics, which support the fintech and other IT sectors, the government may work on campaigns to actively recruit more students for the mentioned IT classes, at state universities.
Privately-run universities should also be encouraged to do the same. The advantage of gaining more skills in this space is that; if they are not utilised locally, they can still be exported, since they are in high demand, internationally.
The government, through the Ministry of ICT, may also support universities by providing the latest software and technologies, which will help in developing relevant and highly-skilled graduates.
The support can be in-kind or in cash, through direct grants, etc. Currently, industry reports reveal that several graduates from local universities enter professional service with only minimal technical skills.
Both the government and private sector should also be encouraged to regularly sponsor university competitions pertaining to the development of IT products.
The products can eventually be monetised for commercial returns. This will inspire the culture of innovation among the students. Academic institutions should strive to search for a market for any feasible product created by scholars, even outside of competitive programmes.
That would also mean that universities should be turned into "academic incubators", which train scholars on how to develop entrepreneurial skills and fundraise for the commercialization of their inventions.
Access to funding for local fintech innovations should also be increased through the revival of the National Venture Capital Fund (of Zimbabwe), and other such initiatives.
In that regard, the mission of the ZSE to launch the "Zimbabwean Emerging Enterprise Markets", which targets to provide funding opportunities for SMES, should also be supported.
General economic growth will also provide more high-net-worth-individuals, who can assist emerging fintech developers with some of their funding needs.
Traditional financial institutions are sometimes accused of stealing the innovations (ideas) of local fintech companies, which present their products to them.
The institutions are also understood to favour collaborating with foreign companies, instead of local talent, when they need an official fintech partner.
On that note, laws on intellectual property should allow for local developers in the fintech space to get lawyers for free, when they have an industrial dispute pertaining to idea-theft. The government should also provide incentives for the firms, which use local "start-ups" as their official partners.
The government can also promote the growth of the domestic fintech sector through enabling pensions, food aid and other social grants to be accessed digitally on local fintech platforms.
That will provide a greater market for fintech products. If the local taxi industry (commuter omnibuses) can be influenced to adopt digital payments, then the market would be made much larger. This would also encourage more competition and innovations in the domestic fintech sector.
Development partners, such as the Department for International Development (DFID, UK), USAID (USA) and Swedish International Development Cooperation (Sida), along with the government, can also be encouraged to provide partial guarantees for loans made to local SMES, small holder farmers and small scale miners, by domestic fintech firms.
This will enable local fintech firms to have the "breathing space" to develop and refine lending facilities for the informal sector, whilst the recipients (of the loans) will have greater access to the much-needed cash flow. Once domestic fintech firms become adept (skilled) at lending to the informal sector, they will then be able to operate independently without assistance.
Resultantly, they will eventually serve a unique and important role, of assisting the informal sector with credit, which traditional banks cannot do.
This can drive strong economic growth since a large portion of Zimbabwe's economy is informal. The success of such products will also enable the local fintech firms to export their services to foreign markets, which do not yet have such innovative products (as lending to the informal sector).
Legislation should also promote the sharing of data (also known as APIS) between local fintech companies so that they have more room to innovate, instead of continuously committing time to search for new data.