Zimbabwe Must Embrace The Inevitable | Terence Zimwara
The very idea that digital currencies like bitcoin can be used as currency for everyday transactions seems farfetched for some. There are many ways this cannot work opponents argue.
For starters, there is an argument often put forward that Zimbabwe’s internet penetration levels and level of sophistication makes this dream impossible. As such, any currency of this nature would turn out to be something for the elite only and this goes against the very notion of such innovations as bitcoin.
Secondly, cryptocurrencies, as some have come to know, are just too volatile. This level of volatility renders them unsuitable for purposes of storing value.
While stock markets can be volatile as well, they however, come embedded with inbuilt circuit breakers to minimize losses. Cryptocurrency markets have not developed to such levels. As such that if a negative sentiment were to permeate through this market the losses suffered will be considerable. Similarly, big gains will be made if there are strong sentiments to that effect.
In that sense, it seems not feasible to use bitcoin as a medium of exchange. Or is it?
What about the rural population
Still, others question just how a generally disadvantaged rural population can ever attain the level sophistication needed to use a cryptocurrency wallet. These are the somewhat valid arguments opponents of bitcoin adoption usually put forward.
Nevertheless, too often the arguments made against financial innovation often expose the level of ignorance of those peddling such. It would seem early adopters of these technologies are not doing enough to share knowledge with those ignorant.
Furthermore, not enough technology or blockchain start-ups spend time educating or raising awareness about the technological breakthrough. It is only when there is a sizeable part of the population that understands and is knowledgeable can a deployment of any such technology be successful.
Yet, this lack of knowledge does not in any way postpone what is certainly inevitable now, the coming disruption of financial services as we know them. Digital currencies are coming and more will still come in the future.
Countries that have demonstrated smart leadership in the past will not wait for the technology to foist itself. They are anticipating the disruption that will ensue and are planning accordingly.
Still, the question lingers, is this doable?
How Ecocash did it
Well, to understand if this financial innovation has any chance of succeeding, we need to look back and see how a different financial technology achieved what seemed improbable at the time.
In 2011, Zimbabwe’s largest mobile network operator (MNO), Econet Wireless Zimbabwe, began an experiment called it called Ecocash.
Ecocash, a mobile money service, was created with a vision of it becoming a service that brings financial inclusivity.
Similarly, when this was being rolled out, questions were also asked. Would the rural population be able to use this ‘complicated’ technology? What if there was no cashing out agent nearby, what would happen to funds trapped in the mobile account?
The list of questions then was also endless. The questions were naturally driven by a fear of the unknown, a typical reaction to anything new or transformational.
However, it seems that Econet anticipated this pushback and had prepared accordingly. It deployed hundreds of peer educators across the country to help get the message about this innovation across.
At the same time, a drive to recruit mobile money agents also commenced. In certain instances, Econet had to offer incentives to potential agents just so they would come on board.
Yet some three years after commencing, the project had taken shape as early adopters were now also spreading the word. The network effect took hold..
Today, the Ecocash project has become a behemoth accounting for about 95% of Zimbabwe’s mobile money transactions volumes.
The statistics get even scarier when one realizes that mobile money transactions now constitute about 80% of all national retail payments.
In just under a decade, the Ecocash mobile money service has grown to become an influential player in the country’s financial services.
Perhaps some of the problems that Ecocash now faces have a lot to do with its success than with allegations made.
Lessons from Ecocash
The success of Ecocash has important lessons for those quick to dismiss any novel idea. It is better to prepare for a coming change than having to play catch up.
Econet knew mobile money was the incoming technology as experiences elsewhere had shown. For example, in Kenya, another MNO, Safaricom had engineered a great success with its MPesa, a mobile money wallet. Econet thus knew it could achieve the same in Zimbabwe.
The same thing again is happening with respect to currency. Those preparing for this inevitable eventuality will fare better than those that choose to deny it will happen.
Digital currencies that are backed by the blockchain are coming and preparing for this is a better option.
Attempting to use political muscle to stop innovations is just denialism that may prove ill advised in the long term. This is appears the case with Facebook’s Libra stablecoin project which has been slowed in its tracks by politics.
The US Congress has used its immense power to scuttle a roll out of Libra but that has not stopped the yearning for a currency that espouses a similar vision.
It has to be noted that the Libra project is not simply an imagination or desire of its promoters to create a financial giant. The idea for the Libra stablecoin is also a response to a growing reality that the global financial order must evolve and reform.
Across the globe, many people are hoping that new financial technologies will continue giving them access, something conventional financial institutions have failed for decades.
To illustrate, according to the last World Bank Financial Index survey (2017), it seems mobile money was the innovation of the past decade. This service may have played a part in reducing the number lacking financial services or the unbanked from over 2 billion people to the current 1.7 billion.
This figure is still too high and now it appears it is the turn of a different financial technology to play a part. Technology is the blockchain technology.
As we showed above, forward-looking countries and central banks have realized this and they are planning accordingly.
For instance, central banks like Sweden’s Risibank have answered this call to reform by creating own digital currency. Others like The Republic of Marshal Islands have chosen to partner with private companies like Algorand to create a central bank digital currency. Algorand’s blockchain has demonstrated a capacity to support a national digital currency.
These two examples show a determination to move with times.
Similarly, Zimbabwean financial authorities can follow in the footsteps of other forwarding looking countries by starting its own digital currency project.
Waiting until private players pounce will result in irreparable damage to financial regulators’ ability to influence financial markets. Tools like monetary policy will be less effective if steps are not taken now to embrace change.
Terence Zimwara is an Ambassador with Algorand Foundation, a technology company behind the world’s first scalable and decentralized blockchain that is based on pure proof of stake consensus. The Foundation is offering funding across application development, tools & infrastructure, research, and education & community. You can contact Terence on Whatsapp 263 771 799 901 or firstname.lastname@example.org
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