Zimbabwe is exploring the launch of a Central Bank Digital Currency to increase financial inclusion for its large rural population and combat inflationary problems.
One of the biggest challenges African Nations face regarding financial inclusion is providing financial services to the marginalized rural population. Zimbabwe is currently exploring the feasibility of launching its Central Bank Digital Currency to counter this.
The country’s large rural population faces challenges in accessing financial services. This makes Zimbabwe a prime candidate for a digital currency solution.
On October 2022, The Reserve Bank of Zimbabwe (RBZ) commissioned the Harare Institute of Technology to work on the practical aspects of the CBDC project. The Central Bank then initiated a survey to gather public opinion on the project’s viability.
The case for a CBDC
The Zimbabwean dollar has been struggling since its reintroduction in 2019. The plummeting effect caused by the excessive printing of money for government expenditure led to a parallel market for foreign currency. The US dollar is now valued at 4 Zimbabwean dollars.
Zimbabwe’s impressive financial inclusion rate of 83%, largely spurred by mobile money, could benefit significantly from an offline CBDC. Internet penetration in the country is estimated at only 29.3%, making it necessary for any CBDC to work offline.
A digital currency can address challenges with financial inclusion, as demonstrated by El Salvador, which nearly doubled its financial inclusion rate in just one year after adopting Bitcoin as a legal tender.
Blockchain technology offers a solution
The Zimbabwean government can now leverage the decentralization that comes along with blockchain technology. Since CBDCs function via blockchain technology, the government can enjoy complete control of the money flow.
The country’s low cash-to-total money supply ratio has forced people to transact through banking channels and mobile money. Channels through which the government can control more easily.
Regulatory stance on cryptocurrencies in Zimbabwe
Despite the ban on cryptocurrency trading, Zimbabweans have shown interest in digital currencies, with an estimated adoption rate of 1.4%. The RBZ interpreted the financial laws to declare crypto operators unregulated in the country, making them illegal.
However, the government’s regulatory stance on cryptocurrencies may need to change if it is to launch a CBDC successfully.
A group of developers launched a wholly Zimbabwean cryptocurrency called Zimbocash (ZASH) to combat inflationary problems. The project has continued to engage with the authorities to allow the trading of foreign cryptocurrencies in the country.
