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RBZ attempts to break informal diaspora remittances, offers money to everyone receiving money through registered channels

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If you are receiving money from the diaspora, the Reserve Bank of Zimbabwe (RBZ) is offering you an incentive of 3% to get that money through official channels.

It’s called the Diaspora Remittances Incentives Scheme (DRIS) and it is expected to sway Zimbabweans who are using informal channels for remittances to use the official, recognised channels that will ensure that the foreign currency flows to the Central Bank.

At the recent unveiling of the partnership between EcoCash and MukuruMoris Mpofu, the Divisional Director for Exchange Control at the RBZ, explained the central bank’s move to extend this incentive to recipients of diaspora remittances.

It is based on the export incentive scheme for importers that the RBZ Governor Dr. Mangudya introduced earlier this year and highlighted in his recent mid-term monetary policy.

What is this export incentive scheme?

This is a performance related export bonus scheme of 5% that was introduced in May 2016 as a way of encouraging exports.

Exporters receive the incentive proceeds in US dollars and the incentive will be credited to their US dollar accounts in US currency.

According to RBZ, an exporter will then be able to transact freely within the multi-currency exchange system through  RTGS for foreign payments such as making settlements for the importation of goods and services.

How will this work for remittances?

Starting from the first of October 2016 this same export scheme will be extended to diaspora remittances. It has been set at 5%  – with 2% being reserved for the money transfer agent and 3% reserved for the recipient.

So for example, every $100 that is received will earn a $5 incentive that will be split between the agent and the recipient.

The agents are expected to prefund the payout (or pass on the 3% to the recipient, this explains their 2% share) on a reimbursement basis.

The Reserve Bank pays the incentive on the basis of money received and this is within 48 hours of the money having been sent. According to RBZ officials, finer details of how this will be executed are set to be shared with bankers and agents today.

Sound concept but riddled with its own challenges

Just like the export incentive scheme that came before it the Diaspora Remittances Incentives Scheme (DRIS) is a notable effort in addressing the challenges with foreign currency inflows.

According to the RBZ, in 2015 alone, an estimated $1 billion was remitted to Zimbabwe through informal channels.

The gamble, in this case, is that Zimbabweans in the diaspora will have an added reason to send money home officially if there’s a carrot dangled.

So far the RBZ has been lobbying Zimbabweans in the diaspora to do this and according to Mpofu their engagement with the Zimbabwean community in countries like the United Kingdom has shown an interest in using official channels.

This strategy is, however, coming up against challenges such as a market that is not keen on receiving or leaving money in bank accounts or the formal system.

With the RBZ’s plans to introduce bond notes in October 2016, there is a general apprehension towards any sort of arrangement that could leave a recipient with money they cannot retrieve straight away.

In the worst case scenario, if transfer agents are affected by foreign currency shortages and funds received plus the incentive can’t be redeemed in time, there could be instances where recipients would be forced to “buy” hard currency which is commonly known in Zimbabwe as “burning money”.

The practice was rife in 2008 before dollarisation and at the height of inflation. In recent months it’s resurfaced as cash shortages have pushed some individuals and entities to buy money.

This probable scenario affecting remittances will effectively mean that the RBZ has set its own rate for burning .

For now, these are all suppositions. We only have to wait until next month to find out how the market responds.

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12 thoughts on “RBZ attempts to break informal diaspora remittances, offers money to everyone receiving money through registered channels

  1. These so called Bond notes by definition are not a currency but debt instruments used to raise capital by companies or banks. They say it is backed by $200mln which is sitting as a liability in the RBZ’s books right now…..mnnnn unless I am totally missing something here….when they give you bond notes you are actually buying the government’s debt, or in other words RBZ is borrowing your US dollars, as we all know RBZ doesn’t pay its debts so it simply means the market value of these bond notes is zero cause they do not have the money and will never be redeemed(Repaid back). They can borrow as much as they want, the $200 ml is a straight lie, issue as many bonds as they need to wipe out every single US dollar in the formal economy until the system implodes & no one has interest in the formal system like in ’08, they have done it before no reason they wont do it again. Forcing these debts instruments on people is like forcing people to lend them money, not even a mafia does that, only a conman with no values or a sense of guilt. ….I have said too much….I hold my peace

    1. Well, we saw it coming.

      The same motivation drives them.

      They want to manipulate value. With the struggle to keep up with the civil service payroll, is to have something whose value they can manipulate.

      They first started by transferring the “book value” amounts to honour their debts and the civil service wages. That obviously created an imbalance that caught up with them with the cash shortages.

      But they don’t own the USD.

      They can’t print it.

      In fact, by international financial law & regulation, it was criminal to be transferring “unbacked foreign currency value” to honour their accounts.

      So bond notes are the only things they can print to back that value.

      So to honour the civil service wage, you just print more bond notes and there will be no deficit.

      That is their reasoning.

      The dumb lot!!

      I would be ashamed to be related to any of them or to even call them parents.

      Yet they still cling on… and even if they cling on, they do not listen to experts.

      You can’t cheat economics. Someone, somewhere will have to pay dearly.

      Guess who that is….?

  2. Hm, the photo shows US dollars changing hands. My understanding is that all these so-called incentives are to be paid only in bond notes, worthless before they even appear. And the much-touted $200mn backup has already been used for other purposes. Valentine is right…it’s just another big scam.

  3. Exactly how they tried to clean the streets of foreign currency in 2008. It is now hard to to trust the sincerity of government in its dealings with the common man. We have been here before and had our fingers burnt. The money government offers will be in bond notes, while it keeps the valuable money out of our hands and in the direct paths of those who are wont to abuse it. Sorry, we will not buy it this time.

  4. they must just put the bond notes like a currency and live the market to decide, they must not put strigent conditions on the bond in the end good money will chase away bad money

  5. There was time when l believed that bond notes where the right direction to get money flowing, but at this rates, it doesnt look so. RBZ must just shut-up. They do not have money, so how earth are they offering money they do not have.

    This means they have to print more bond notes to cover this pie in the sky money.

    Everyone say Hello to ZimDollar

    Insanity = Repeating the same thing and expecting different result!!

  6. its another ponzi scheme only the government is involved this time,bring your money and what do we get bond paper

    1. Folks in Beitbridge cross the border and daily or multiple times daily if they wish. So assuming they spot it, send money from Mesina, collect it same day and get 3%; cash out, go back to Mesina and send it straight back, however many times you can in a day each equates to a cool 3% additional? Diasporans no need to wait for month end any more. Send all your savings back home, catch a plane ticket, harvest 3% if you can get the cash on the street and head off straight back to do it all over again. Now this is really meant to be a friendly public note to the powers that be, in the public interest do the maths first and consider impact of anything that is given for nothing. Where else can I get 3% per day, or 1095% per annum?

      1. Tiki you are absolutely right. if you receive the money in US$s cash in your hand in Zimbabwe then you just go back to SA and spin it over again, im sure there are some dealers already on their way to beit-bridge and plumtree as we speak lol

  7. Ini hangu I know Zimbabweans, we are all talk. The bond notes will come and they will take our US$s like they did before. hanzi once bitten twice shy, there is nothing like that here. the bond notes will come and all of a sudden the banks will say they do not have US$s and give you bond notes. As you go out of the bank, with your bond notes there will be a chef or a dealer ” Businessman” walking out of the same back with a suit case full of US$s
    brace for shortages of basic commodities in 2017

  8. This is another “not well thought out ” plan. When pple send money into Zim from the diaspora through official channels they lose 5-10% on the exchange rate offered by these companies and the fees on top. With informal, you usually get very close to inter-bank rate with no fees – Go figure..

  9. Y’all probably the same guys who were skeptical about SI64. Say what you want, Mangudya is a thinker.

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