Zimbabwe central bank bids to formalise $2bn international remittance market

THE central bank has licenced 27 designated money transfer operators and agencies, including Econet Wireless and eight banks, to carry out international remittances as well as trade in currencies.

The development is part of moves by the authorities bid to draw diaspora remittances into the formal banking system.

Remittances from millions of non-resident Zimbabweans are a significant contributor to the country’s economy, reaching $840 million in 2014 (about 6 percent of GPD and 23 percent of exports), up from $790 million the previous year.

The central bank estimates that Zimbabwe gets as much as $2 billion in annual diaspora remittances, with only a fraction of that going through formal channels.

In January, the Reserve Bank of Zimbabwe relaxed exchange control measures to allow local money transfer businesses to conduct outward remittances which were previously not permissible.

In a statement, the central bank said the 27 “authorised dealers with limited authority” would operate under a three-tier system.

“Tier One is comprised of locally incorporated money transfer operators partnering with approved international money transfer organizations or use own systems and permitted to carry out both inward and outward international remittances.

“This tier also buys and sells foreign exchange on a spot basis,” reads the central bank notice.

Stanbic Bank, Steward Bank, CABS, POSB, Zimpost and telecoms firm Econet, which operates the country’s mobile money transfer service EcoCash, are in the central bank’s first tier.

Tier two, according the central bank, is made of money transfer operators operating as money transfer agencies only permitted to carry out inward international remittances and buy and sell foreign exchange on a spot basis.

“Tier three is comprised of Bureau de Change-locally incorporated financial service provider which only buys and sells foreign currency spot on,” the RBZ said.

After abandoning the local unit for the multi-currency system, widely dominated by the United States dollar and South Africa’s rand in 2009, Zimbabwe has relied on exports and remittances from its sizeable non-resident population to plug the country’s liquidity gap.

The capital starved country has lagged regional peers in attracting FDI due to poor rankings on various ease of doing business indices and structural issues besetting the economy.

This has seen the country relying on other sources of liquidity such as remittances from Zimbabweans living abroad. Zimbabwe’s major source countries for remittances are South Africa, United Kingdom, Botswana, Canada and Australia.

Official figures show that about 88 percent of Zimbabwean diaspora are in South Africa and contribute about 33 percent of remittances.

Central bank figures also show that nearly nine percent of Zimbabwean diaspora is in the UK and contributes about 23 percent of remittances.

Projections indicate that global remittances to developing countries likely grew by five percent to $435 billion from 2013 to 2014 and are seen rising further to $454 billion in 2015.

Sub-Saharan Africa is expected to experience exponential growth in remittances from 0.9 percent in 2012, to a pole position of 5.4 percent in 2017.

SOURCE:NEW ZIMBABWE