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Is a 100% cashless economy possible for Zim?

There is too much speculation around the introduction of bond notes and what that will mean for the future of Zimbabwe’s economy.

By Donald Mudenge

While the mention of a surrogate currency invokes memories of hyperinflation and untold economic hardship most Zimbabweans suffered a few years ago, the question is, what other plausible monetary route could Zimbabwe employ to turn around its economy? Are there any other options? The answer is going 100% cashless!

Zimbabweans use a mix of hard currency and plastic money to pay for local goods and services and this has become a huge challenge owing to the cash shortages.

Today Zimbabwe is a country without its own currency and that means it cannot print money that can be injected into the money supply and neutralise some of the liquidity issues being experienced. The bond notes to be introduced are reportedly backed by a $200 million African Export and Import Bank (Afreximbank) loan and if these figures are correct, then does it mean Zimbabwe is plunged into a fresh $200 million debt upon the issuance of the bond notes? What would happen if the $200 million does not optimally circulate? The regulators might be forced to secure another loan, hence plunging the nation into further debt.

On the other hand, instead of introducing a surrogate currency, the government could opt to go “100% cashless”, a feat that can be achieved via mobile money. Naturally, mobile money value must be backed by a physical cash value held at a trust account with a local bank.

However, in the situation of Zimbabwe where there is no currency at the moment, then the nation can create something good out of a bad situation by promoting channels that can build on forex reserves and use those reserves as a backup of the electronic value in the hands of local users, who in the first place would have played a role in the build-up of the reserves, as shown below.

While a single article cannot optimally cover all the avenues that could be employed to back mobile money locally, there are certain short to long-term benefits to be reaped should Zimbabwe decide to go 100% cashless.


Zimbabweans in the diaspora are remitting close to $1,8 billion to Zimbabwe annually. The recipient cashes out at an agent (bank or retailer), and spends the funds, physical cash, on local goods and services. This is not a problem until you visit your agent and are told there is no money to cash out, or you can cash out just a fraction of it at a time.

In a cashless economy, however, the remittance value will be issued to the recipient as electronic cash and not physical cash. The recipient must of course have a mobile bank account opened in order for them to receive and spend the e-value. Since all the remittance funds are in foreign currency, there should therefore be the creation of a forex remittance reserve at local participating banks in Zimbabwe.

When the funds are received, the recipient will still get the same notification on their mobile devices but instead of going to an agent to cash out, they are now visiting the agent to validate themselves (proof of life) so that the agent can facilitate the credit of the electronic funds equivalence and not physical cash to their mobile bank account.

The physical value of the cash is held at an escrow account, a public remittances reserve account, with the local bank. The recipient/customer can then go and spend the e-money at any participating retailer of goods and services through POS transaction mechanisms which allows for remote and proximity transactions. The funds can also be instantly spent electronically on Value Added Services.

When a Zimbabwean mobile bank account holder decides they need to go and buy goods for personal consumption in neighbouring countries such as South Africa, they will by no means be able to spend e-money beyond the Zimbabwe borders, but if they have an e-value on their account, then they can go and apply for the forex at the participating bank, the same bank which is holding the remittance reserves. The banks become the only points to facilitate cash outs or the customer whereby the customer can receive physical cash or have the funds unlocked through a debit card.

All other local corporate importers and exporters will be required to play by the same rules. Exporters will need to have a mobile account suitable for their business and must declare their receipts with the local bank participant. Whenever an exporter receives revenue for goods sold abroad, the funds will be generated through the bank participant but the exporter will only be credited with the e-funds equivalence less the government taxes due, etc.

The physical cash is held at the bank. When a company wants to import, they will certainly require foreign currency, and where will it come from? From the same reserve where exporters are declaring their receipts.
The importers are after all already receiving payments for their goods and services from local customers via mobile money, and whatever value they need for import purposes will be deducted from their mobile account and they receive the physical forex to an “importers” bank account to pay the offshore suppliers or this can be simply facilitated via the RTGS system at the bank.

Wage bill

Let us also consider a sector such as the industrial/manufacturing. How can mobile money be used to rejuvenate a sector such as this, or any other for that matter? The wage bill of this sector will be settled electronically via mobile money. This instantly begs the question: where do we get the physical value to back-up the e-funds for the e-money wage bill? Through a combination of investors’ funds and man hours.

For example, if each industry employee is expected to work 1 000 man hours to get an industrial project done then when he or she is hired, their employer will allot 1 000 man hours (based on the job specifics) to each contracted employee account, thereby creating a “float of man hours exchangeable at an agreed man hour/$ rate (e-funds)”.

The man hours are then credited to each employee’s account held by the employer. As an employee clocks-in when reporting for duty, he or she is essentially redeeming their man hours for e-funds. At the end of the week, the employer pays the employee the electronic funds equivalence of man hours worked (exchanged) at the agreed rate. And thus the employee gets paid e-funds directly to his mobile bank account.

If you don’t work you still have your man hours to your credit but no e-funds. This is one sure way of encouraging fair remuneration based on output and attract investors as they will be able to closely monitor projects and the appropriation of their capital investment funds.

Donor community

The same mobile platform could also be applied for the donor community and diaspora-based well-wishers. At the present moment there is not much funds by way of donors coming into Zimbabwe. This is mostly due to the fact that there is really no reliable way to trace and monitor the disbursement of donor funds and as a result, most is lost before it even reaches the intended beneficiaries.

With a cashless economy, however, there can be the creation of what we can call a “special purpose fund” account, which is still a trust account. Funds to this account are generated through diaspora donations, whereby a digital vault is set up and monitored and controlled by the local regulator.

The special purpose fund enables donors and well-wishers to remit funds for specific local sectors in distress. Within this main fund there shall be the creation of “special sectors” accounts for farming, health, education, tourism: anti-poaching, sectors, etc.

There are a number of ways through which Zimbabwe can stand to benefit when a cashless ecosystem is promoted and implemented through the support of regulators and of course the citizens of Zimbabwe. The scenarios described above are 100% applicable and some are already in use in other African countries in various degrees of application. The above is not exhaustive but these are just some of the ways Zimbabwe could achieve a 100% cashless economy and use that to turn around its economic for the better for all citizens.

Donald Mudenge, COO of MCash South Africa

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