According to an article by Fortune Magazine, Zimbabwe suffered one of the worst hyperinflation at the turn of the century and at its worst in 2008 a can of Coca-Cola that cost ZIM$50 billion in the morning would cost ZIM$150 billion at the close of business on the same day.
This forced President Robert Mugabe’s government to abandoned its own currency in 2009 in favor of currency from other, more stable countries. Today, Zimbabwe’s economy relies almost exclusively on the U.S. dollar, IT News Africa reported.
But the “dollarisation” of the economy has created a new set of problems. The limited number of bills in circulation are old and tatty, and shopkeepers are unable to make change due to a shortage of coins. That means shoppers are forced to accept change in the form of chewing gum, cigarettes, and other small items.
Econet Wireless, one of Zimbabwe’s top telecoms operator, want to solve this problem by introducing a mobile wallet technology, known as EcoCash, and making it Zimbabwe’s primary method of payment.
Strive Masiyiwa, founder and chairman of Econet Wireless, says his company wants to replace the current printed currency with a digital alternative. If successful, Zimbabwe will indeed become the first paperless economy in Africa.
“EcoCash has been able to take advantage of this situation by providing an alternative medium of exchange from physical dollars,” Laurence Chandy, a development specialist at the Brookings Institution in Washington, told IT News Africa.
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“When payments are made at stores, change can be provided in the form of an airtime top-up or mobile money.”
The service which was only launched two years ago, has already registered a third of Zimbabwe’s adult population, a group responsible for more than $200 million in transactions per month — that’s about 22 percent of the country’s GDP — using their mobile phones.
This has helped Econet, which also operates in Nigeria, South Africa, and Botswana, diversify its portfolio away from its core voice and data business, where revenue growth has been slowing down in recent years due to tight competition.
EcoCash has managed to filling a basic consumer need in one of Africa’s economically troubled countries, where a great deal of the population has been excluded from the formal banking system.
“EcoCash is a strategic response to a strategic challenge,” says Darlington Mandivenga, CEO of Econet Services, a subsidiary tasked with expanding the company’s non-traditional revenue streams, including microinsurance and microfinance.
“What is happening in the telecoms industry is that revenues are stagnant, if not on the decline, with [average revenue per user] under pressure for various reasons such as competition and market saturation.”
Econet has embarked on an aggressive merchant acquisition campaign. It is sacrificing short-term profitability by paying out 80 percent of revenue in agent commissions to build a strong and dedicated network.
The company is also using bank-grade technology to fast-track interoperability with Zimbabwe’s major financial institutions and make it easier to deploy new mobile services. One of those services is EcoSave, which allows otherwise “unbanked” people to safely put away money for emergencies.
In two weeks, the tool prompted an influx of 500,000 new account openings, turning Econet subsidiary Steward Bank into the country’s largest bank by number of accounts.
If successful, Zimbabwe’s EcoCash could overtake Kenya’s M-Pesa — which, with a four-year head start has signed up two-thirds of the adult population in that country – as the world’s gold standard for wireless financial services.