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Business Reporter
Market analysts expect listed fintech group EcoCash Holdings to enjoy an uptick in US dollar transactions during the current financial year, albeit a challenging macroeconomic landscape.
During the financial year to February 28, 2023, the group introduced the EcoCash US dollar wallet in its quest to consolidate its participation in the US dollar economy.
This comes as the intermediated money transfer tax (IMMT) popularly known as the 2 percent tax on US dollar transactions was revised downwards, a move that should spur the market to use the wallet services.
Last November, Finance and Economic Development Minister, Professor Mthuli Ncube proposed a downward review of the Intermediate IMTT on domestic foreign currency transfers from 4 percent to 2 percent effective January saying most entities were now preferring to settle transactions in cash instead of electronic transfers. The tax has since been reviewed further to 1 percent.
Whilst the regulatory restrictive limits on the mobile money business, as well as the general cash economy on the US dollar transactions, exerted pressure on the top line, significant growth was noted in transaction volumes and values following the reduction in IMTT.
Additionally, the return of domestic US dollar remittance services should also drive demand as well as transaction volumes.
Already, the group, through its banking unit has moved to capture a share of the growing domestic and international remittances market with the opening of The Eastgate Remittance Centre, a dedicated remittance facility for customers to access funds sent from within and outside of Zimbabwe.
Market watchers opine that while the group’s revenue will be impacted by currency depreciation and inflationary pressures, the mobile money platform will enjoy economies of scale on the domestic foreign currency transactions, as these are expected to increase following the review of the transaction tax. Generally, the group is expected to face significant headwinds from unfavourable economic conditions, which is expected to affect its main businesses, that is EcoCash and Steward Bank.
“The company’s main revenue drivers, Steward Bank and Ecocash face significant headwinds which may sustain in the short to medium term,” said stockbrokers IH Securities.
“The core banking function of lending is set to remain subdued owing to high-interest rates on Zimbabwean dollar loans despite noticeable growth in the US dollar loan book,” said IH Securities.
For the past financial year, Steward Bank continued to grow its US dollar interest-earning assets, particularly in the corporate sector. This was coupled with an increase in foreign currency accounts accounts, which grew by 34 percent.
The group continues to scout the local and regional markets for strategic opportunities which complement its vision of a digitally connected future. Plans are underway to contribute towards sustained innovations in the Fintech, Insurtech, Healthtech, Agritech and On Demand Services space.
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