So the Reserve Bank of Zimbabwe Governor, Dr John Mangudya delivered his Mid-term Monetary Policy Statement yesterday. In the appendices there is reference to financial technology businesses (Fintechs).
The weight of fear
The central bank continues to have quite an amount of fear and skepticism regarding fintechs. Here is one of the introductory paragraphs:
Notwithstanding the benefits, the new technological innovations bring to the fore additional risks that should be mitigated in a manner that balances innovation and financial stability. This underscores the significance of constantly reflecting on the emerging fin-tech trends and broader changes affecting the financial services industry.
There is a lot of fintech interest in Zim
We have always known that due to the unique levels of cashlessness in Zimbabwe, there is quite an interest from around the world to offer solutions to this market. Some global startups see Zimbabwe as a potential test ground for their innovations. The RBZ acknowledged this level of interest:
As a result of the technological developments, there has been a surge in the number of enquiries and proposals from local and foreign companies intending to offer Financial Technology (Fintech) services and products in the country.
The response: bureaucracy
There is an obvious need to be careful whilst still embracing new innovation. The RBZ has its way of reaching this balance:
Against this background, a National Fintech Steering Committee comprising government line ministries, government departments and regulatory agencies was constituted to provide strategic policy direction in the Fintech space.
The problem I have with the above is the constitution of the steering committee. Unless the governor merely omitted the mention, there doesn’t seem to be participation by fintechs themselves. As long as that is the case, these institutions will position themselves as well as be viewed by startups as hurdles and not partners in building a robust and sustainable ecosystem.
A second group set up by the Reserve Bank is constituted the same way:
In addition, an Interagency Fintech Working Group (IFWG), comprised of technical staff across government line ministries, government departments and regulatory agencies as well as relevant stakeholders was constituted. The IFWG is supported by the following thematic working committees:
b) Crypto Assets and Digital Currencies;
c) Innovation/Technical; and
d) Consumer Protection.
Again, the working group is a collection of bureaucrats. As long as the regulatory setup remains a ‘them vs us’ affair we are not going to see much progress.
It’s either the bureaucrats will squash anything and everything that’s new in an attempt to describe the new in terms of the old. The other extreme is also possible, the bureaucrats may be too impressionable and give even shameful scams free reign just because the proponents of such sound smart.
We already have a problem on this continent that everything that a foreigner brings to us is good, innovative and ‘foreign direct investment.’ At the same time what comes from our own is treated with suspicion and local entrepreneurs are usually viewed as ignorant: “they want to do such and such because they don’t really understand banking and finance, it doesn’t work like that…” This is a common arrogant response from highly educated bureaucrats.
This dichotomy may result in Zimbabwean consumers being exposed to mediocre and unsafe foreign ‘solutions’ that have no local context. At the same time, local innovators may find themselves faced with a very difficult hurdle in their quest to go to market.
I advise the RBZ to include startups and fintechs in these institutions they are setting up. There are quite a number of them that have proved they deserve a seat at that table here in Zimbabwe.
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