The Reserve Bank of Zimbabwe’s governor, John Mangudya recently revealed that the central bank had issued crowdfunding licences to four fintechs whose names he refused to reveal. This was done under the banks’ Fintech Regulatory Sandbox which is meant to help test new fintech ideas before they are opened up to the broader public. This development would be welcome news to Zimbabwean startups and established businesses that continue to struggle with the capital drought in Zimbabwe.
The capital desert that is Zimbabwe
One of the reasons why Zimbabwean companies struggle to compete globally is because the country is essentially a capital desert with very few foreign investors willing to risk their money. The president used to preach his “Zimbabwe is open for business” message to anyone who cared to listen. At first, he was able to ink a lot of memorandums of understanding with various trade partners but the bulk of these never materialised thanks to the investor risk associated with bringing your capital to Zimbabwe.
Crowdsourcing could be like an oasis in that arid desert. Like the name suggests, it is a system that allows companies, startups and individuals to raise money for a cause or to finance an idea. It is a system that can be used by established businesses as well as businesses that are at the foundation stages. This is not a novel idea by any means, international crowdsourcing platforms have existed for years with companies such as Indiegogo, GoFundme among many others.
A lot of Zimbabweans in the diaspora have used these platforms successfully in the past to fund different causes and business ideas but there are some restrictions and issues that prevent the ordinary Zimbabwean business startup from using these platforms. First, there is the issue of sanctions and U.S financial regulations that see a lot of such platforms opting to shut out Zimbabweans rather than spending money on compliance. Then there is the fact that some of these use payment platforms like PayPal which are not available to Zimbabweans when it comes to receiving money. Then there is general visibility of Zimbabwean products and ideas on such crowded places which are dominated by even silly U.S and European based ideas.
Internally in Zimbabwe, the archaic laws and attitudes towards nascent fintech technologies have not helped at all. As already said, crowdsourcing is a decades-old idea. Here in Zimbabwe, the issue has always been regulatory rather than anything else. Crowdsourcing fintechs in other countries have always had less burdensome regulations to deal with. It is ironic that in a country where crowdsourcing would do the most good fintechs have to jump through impossible hoops before they are allowed to operate.
The coming summer of good things?
It is tempting to think of this licensing as being a herald to more impending good things. To think that we will have our own Indiegogo soon but one ought to always have caution when predicting the future in Zimbabwe. The RBZ’s sandbox has not yet lived up to its potential. Ideas take too long to leave the sandbox and enter the real world. We still have crypto ideas rotting in there while the rest of the world has embraced crypto even during this crypto winter.