Feature: Zimbabweans look at plastic money as alternative amid cash crisis

Informal worker Tonderai Chiwara has been leaving home as early as 6:00 a.m. every week day since his employer deposited his salary into his bank account, hoping to be among the early birds at the bank so that he can get some money for his business.

With the current cash crisis dogging the country, Chiwara knows that if he gets to the bank late he may have to spend most of the day there waiting for the bank to get the cash to dispense to clients, or may simply be told that there would be no more withdrawals for the day.

"It's very cold in the morning, but I have to get up early to be able to be at the front of the queue. Sometimes we are told that there is no money in the bank and we have to wait for two hours or more before the cash arrives," he said.

"By the time I get the money, I will have lost lots of productive hours and still the money will not be enough for my requirements," he lamented.

Chiwara's bank has been allowing maximum withdrawals of 100 U.S. dollars to allow the little cash it has to circulate among as many clients as possible.

"So I have to come here every day in order to build my stock and then buy the material I need for my job," he added.

He said he had not had problems using his bank card in the shops but still needed cash to do other transactions.

"I cannot pay my gardener using the bank card, unless he wants me to pay him in the form of groceries which becomes very easy for me."

Economists and the Reserve Bank of Zimbabwe (RBZ) are advocating greater use of plastic money, with the central bank intending to make 80 percent of monetary transactions to be via plastic money in the next five years.

Senior economist for the Bankers Association of Zimbabwe Sanderson Abel recently called for the use of plastic money in the form of credit, debit and pre-paid cash cards because there was usually no need for people to have cash on them.

"In the current globalized economy, purchases across the globe can be made through mail, telephone or via the internet. These purchases can only be possible through the use of credit cards," he said.

However, while plastic money has worked in the formal sector, many people are still to accept its reliability especially after previous bank failures which wiped out the accounts of millions of clients.

The current cash squeeze, too, does not give the people enough confidence to open bank accounts.

In fact, the number of people using banking products declined in 2015, with only 14 percent of micro, small and medium enterprises being formally banked, according to the central bank.

About 80 percent of local transactions were also done in cash as people shunned banks.

Many companies also pay their worker's salaries in cash, by-passing the formal banking system mainly because they will be dodging statutory taxes.

RBZ governor John Mangudya also noted that while many shops offered points-of-sale facilities using plastic money, many Zimbabweans still preferred to deal in cash.

Some retailers are also reluctant to embrace plastic money, noting the delays they encounter in accessing their cash after transactions.

Confederation of Zimbabwe Retailers president Denford Mutashu told local paper NewsDay that retailers did not readily accept debit cards because it would take between 12 and 24 hours for them to have money in their accounts from the card-based transactions.

Techzim, a news blog that focuses on covering information technology news, views and reviews about products and services in Zimbabwe and the surrounding region, has advocated more use of mobile banking to cope with cash shortages.

It also noted that Zimbabweans generally preferred to deal in cash following years of insecurity in the banking sector.

"Our country's economy has slowly embraced the movement of money through informal trading channels and mobile money has emerged as a convenient tool for carrying these transactions," Techzim said.

In a recent telecommunications quarterly report, industry regulator, Postal and Telecommunications Regulatory Authority of Zimbabwe, said mobile money services registered transactions valued at 533 million dollars in the three months ending December 2015 from an aggregate of 7.3 million mobile money subscribers.

"The service's popularity has been fueled by a high mobile penetration rate, the ubiquity of mobile money agents -- there are over 33,000 mobile money agents across Zimbabwe -- limited requirements for signup as opposed to formal banks' account registration and of course, the significant distrust that the country's banks have earned," it said.

Techzim added this week that as it gets harder to withdraw money from bank accounts or to cash it out from mobile money agents, the services that already rely on electronic payments could position themselves for greater visibility.

"All this stems from the fact that consumers, faced with the need to make certain purchasing decisions, for example groceries, will increasingly look at cashless alternatives."

"They are likely to become comfortable with any of these services as they adapt to electronic transactions, but only as long as products or services are delivered and customers can bank on the reliability of service providers," it added.

Monetary authorities are mulling various other ways of easing the cash crisis, including the introduction in October of the much maligned bond notes in denominations equivalent to 2 dollars, 5 dollars, 10 dollars and 20 dollars.

The notes, which are being printed in Germany, will be backed by the same 200 million dollar Africa Export Import Bank facility used for the bond coins already in circulation since 2014.

The coins were introduced to deal with the problem of small change and enable retailers to round down prices which had hitherto been rounded up for maximum profit.

While people have gained confidence in the bond coins and now prefer them to the rand, they are not so sure about the bond notes and have continued to ridicule them on social media.

The International Monetary Fund has said it is studying the proposal by Zimbabwe to introduce the bond notes, but President Robert Mugabe said Thursday that bond notes were the way to go.

The country abandoned its currency in 2009 after inflation reached an official figure of 231 million percent, although independent analysts put the figure at more than 4 billion percent. It has, over the years, adopted nine currencies -- the yuan, South African rand, Botswana pula, pound sterling, Indian rupee, euro, Japanese yen, Australian dollar and the U.S. dollar.

Until late 2015, the rand was also widely used alongside the U.S. dollar, but Zimbabweans now shun the South African currency because of its volatility against the greenback. Endit