- Remittances in Zimbabwe are the third largest forex earner next to gold and platinum.
- The platforms used to process remittances ought to be efficient.
- Inefficiency results in both macro and micro-economic and social challenges.
The importance of remittances in Zimbabwe cannot be understated. According to a report from The Herald, diaspora remittances grew by 15,9 percent in 2022 to US$1.65 billion. The importance of remittances was echoed by the World Bank in a statement that expressed the sentiment that the diaspora of developing countries like Zimbabwe poses the potential to promote trade, and investment. Moreover, in light of the importance of foreign currency in the Zimbabwean multicurrency economy, diaspora remittances are said to make up about a sixth of the country’s foreign currency receipts. They are the third largest forex earner next to gold and platinum.
In this light, we consider the inefficiencies that exist in the processing of these crucial sources of economic receipts both from a micro and macro perspective.
On the 31st of February one of the leading companies by which the diaspora sends money home, for a varying array of purposes, was offline. The challenge has persisted with no effort made to inform those who rely on the service. The severity and longevity of the problem remain unknown, thereby increasing transaction costs.
From business to household, the consequence of illiquidity should not be understated. In Zimbabwe where a significant share of the business is conducted in the informal sector by small businesses, it stands to reason that entrepreneurs who require short-term finance for their daily operations may depend on remittances and on the companies who facilitate these transactions. The severity of a day’s loss of operations is further exacerbated by the small margins on which small business owners (such as hairdressers, barbers, and vendors) survive. The loss of a day’s work when viewed under this lens becomes increasingly dire.
In conclusion, we see that it is important to ensure efficiency in the processing of remittances. On a macro-level, the platforms by which remittances are processed must be up to standard in order to inspire the confidence of the diaspora which is key to the increase in usage. On the micro-level, the importance of processing efficiency and reliability is centred on the importance of liquidity both on a business and personal level. Regarding the latter, it would not be farfetched to conclude that the money sent from the diaspora may be intended for school fees payments and medical expenses; immediate needs that if forgone will result in dire consequences.