Navigating the Regulatory Landscape: An Analysis of FinTech Regulation in Zimbabwe

SHALOM MUTUKUMIRA AND FUNGAI CHIMWAMUROMBE

The rapid growth of mobile money and digital payments has significantly transformed the way Zimbabweans conduct financial transactions, yet it raises important regulatory questions.

The increasing use of technology in delivering financial services necessitates an analysis of Zimbabwe’s current FinTech regulatory framework while also highlighting the challenges and opportunities emerging from this rapidly evolving industry.

What is Fintech?

Fintech, short for “financial technology,” refers to the use of technology to provide and improve financial services. It encompasses a wide range of innovations that make financial processes more efficient, accessible, and secure. Fintech companies typically use software, apps, and platforms to offer services like:

• Digital payments (e.g., mobile wallets, online payment systems)
• Online banking (e.g., mobile-only banks, peer-to-peer lending)
• Investing (e.g., robo-advisors, stock trading apps)
• Cryptocurrency (e.g., Bitcoin, blockchain technologies)
• Lending (e.g., peer-to-peer lending platforms, microloans)
• Insurance (e.g., insurtech startups offering more personalized insurance policies)

Overview of Zimbabwe’s FinTech Industry

To date, fintech in Zimbabwe is largely a story of digital payments. Driven by a range of factors, the volume of digital payments grew from 38 million in 2012 to 367 million in 2016, and then accelerated to 1.96 billion in 2018. The Reserve Bank of Zimbabwe (RBZ) is actively promoting fintech innovation through initiatives like the Fintech Regulatory Sandbox

There are 77 FinTech startups in Zimbabwe, including popular ones like EcoCash, Sasai, MyCash, Zimswitch, and Nurture. Of these, 5 have received funding, with one securing significant Series A+ funding what is A+ funding and why is it important to mention?. Over the past 10 years, an average of 4 new FinTech companies have been started each year.

Current Regulatory Framework

The regulatory framework for the provision of financial services in Zimbabwe is governed by several laws and regulations, including:

• The National Payment Systems Act [Chapter 14:23]
• The Financial Services Act [Chapter 24:07]
• The Banking Act [Chapter 24:20]
• The Reserve Bank of Zimbabwe Act [Chapter 22:15]

These laws and regulations provide a framework for the regulation of payment systems, financial services, banking, and reserve banking in Zimbabwe. However, they were enacted before the advent of FinTech and do not specifically address the unique challenges and opportunities presented by this industry.

Challenges and Opportunities

A number of obstacles, such as uncertain legislative frameworks, poor digital infrastructure, and restricted access to money and investment, prevent the development of FinTech in Zimbabwe. Additionally, the anonymous nature of digital transactions increases the risk of money laundering and terrorist financing, and FinTech companies and their clients are at serious risk from cybersecurity threats and data breaches. Additionally, the adoption and use of FinTech services are restricted by Zimbabweans’ lack of financial literacy and awareness, especially in rural areas.

On the other hand, there are also opportunities for FinTech companies in Zimbabwe, including:

The expansion of FinTech in Zimbabwe presents numerous opportunities, including enhancing financial inclusion by providing access to financial services in underserved areas and economically disadvantaged communities. FinTech has the potential to reduce costs, drive economic growth, and streamline financial transactions, making them more efficient and accessible. It can also foster innovation and entrepreneurship, creating new job opportunities in the process. By promoting digital payments and mobile money, FinTech can help reduce the country’s reliance on cash and contribute to a more transparent and accountable financial system. Furthermore, it enables Zimbabwean businesses to tap into new domestic and international markets, expanding their reach and customer base.

Recommendations

A comprehensive approach is needed to fully harness the potential of FinTech in Zimbabwe while addressing its challenges. This includes establishing a FinTech regulatory sandbox to foster innovation and experimentation, investing in robust digital infrastructure to support growth, and educating the public about FinTech’s risks and benefits. Additionally, promoting collaboration between FinTech startups, traditional financial institutions, and government entities is crucial. To mitigate risks and enhance opportunities, strong anti-money laundering (AML) and counter-financing of terrorism (CFT) measures should be implemented, alongside improved cybersecurity protocols. Encouraging financial inclusion through FinTech solutions will also play a key role in maximizing the sector’s impact.

Conclusion

The growth of FinTech in Zimbabwe presents both challenges and opportunities. To address these challenges and opportunities, it is essential to develop a comprehensive regulatory framework that specifically addresses the unique challenges and opportunities presented by FinTech. By doing so, Zimbabwe can create a supportive environment for FinTech innovation and growth, which can help to drive financial inclusion and economic development in the country.

Shalom M Mutukumira is an IT engineer and administrator at Zenas Legal Practice and can be contacted at shalom@ zenaslegalpractice.com and WhatsApp 0779 184 401

Fungai Chimwamurombe is a registered legal practitioner and Senior Partner at Zenas Legal Practice and can be contacted for feedback at fungai@ zenaslegalpractice.com and WhatsApp 0772 997 889.