The Zimbabwean government will need to make up its mind on financial inclusion soon. Their love-hate relationship with mobile money and Lite bank accounts needs to stop.
In its never-ending fight against currency manipulation and resultant depreciation, the Reserve Bank of Zimbabwe often moves to promote digital channels over cash.
It’s a hard sell for Zimbabweans in the best of times, so when you consider the tax (IMTT) on those transactions, the transaction limits, the fast depreciating ZW$ and the hustle of opening said bank accounts, you can see why the RBZ won’t succeed in that effort.
There just isn’t any good reason to move from cash, even if it’s inconvenient to use at times.
We have talked ad nauseum about the lack of trust people have in their central bank. However, today let’s talk about the Lite bank account.
The lite bank account
Consider this, the true pioneers of the Lite bank account – Steward Bank – have since moved on from it. Many other banks no longer offer that account too and it all goes back to the RBZ’s policies.
I was on the market to open a few bank accounts and found this out for myself. I had an interesting conversation with some bankers who told me that the RBZ had been on their case for not taking Know-Your-Customer (KYC) seriously.
See, Lite bank accounts, also known as KYC-lite accounts, like mobile money accounts, only require an ID to open. Unlike the full savings and current accounts that require proof of residence, a payslip and a confirmation of employment letter.
This is why Lite accounts are (were?) popular because in urban areas where most people rent, getting proof of residence is a challenge.
Some landlords won’t sign affidavits, some won’t release utility bills, and some are subletting and cannot risk the actual house owner finding out about their arrangements.
Then for the majority who are informally employed, the need for a payslip and confirmation of employment means it’s either cash or mobile money for them.
So, the Lite account was crucial in the RBZ’s financial inclusion efforts.
Why the Lite account is dying
The RBZ went on a rampage against mobile money operators (mostly just EcoCash), accusing them of sabotaging the economy. The central bank had noticed that some money changers/forex dealers were using mobile accounts to trade.
So, since that episode, the RBZ has been torn on mobile money and Lite bank accounts. Yes, they allow for better financial inclusion and may help ease the demand for cash. However, some elements may abuse them and help tank the local currency.
“The Reserve Bank has repeatedly emphasized the need for every banking institution to promote adherence to the letter and spirit of KYC principles,” said the RBZ in a circular.
So, the banks paid attention when EcoCash was grilled for its KYC-lite situation. Then the RBZ started grilling the banks on their own KYC situations, claiming that economic saboteurs were using these Lite accounts to trade.
All while claiming to promote financial inclusion on the side.
Some banks, like BancABC and Steward, found this hounding a little too much to bear and simply stopped offering lite bank accounts. Apparently, the little business they got from the Lite accounts was not worth the headache of dealing with the RBZ and the Financial Intelligence Unit.
Cash economy
The RBZ is essentially telling the masses to use cash and that’s what the market is doing. If you can help it, you are not going the digital payments route.
I feel sorry for banks because we oftentimes hurl vitriol at them for being snobs when it comes to opening accounts with them. Well, the RBZ is to blame.
You would have thought that with the transaction limits placed on lite accounts, the RBZ would be satisfied that they are not being used to sabotage the economy.
Alas, they are busy abusing financial service providers about how Lite accounts are being used, demanding better KYC, which defeats the purpose. It’s ridiculous, if you ask me.-techzim