Recently I profiled Lloyd Crowdfunding, a Zimbabwean crowdfunding startup. It turns out it is the first-ever licensed crowdfunding startup in Zimbabwe. Now, you would also like to know that the RBZ has issued 4 crowdfunding licenses. This was recently revealed by the central bank governor, John Mangudya. I am not sure though which the other 3 licensees are as he did not specify their names. Overall, the issuance of such crowdfunding licenses is a good move. It plays a role in making crowdfunding a mainstream thing in Zimbabwe.
The Fintech Regulatory Sandbox
The issuance of these crowdfunding licenses is based on the tenets of the RBZ Fintech Regulatory Sandbox. This is a set of standard operating protocols that govern the approval, testing, and rollout of fintech services in Zimbabwe.
The Fintech Regulatory Sandbox is intended for innovators in the financial services sector who have already developed their service, product or business model and are ready to undertake a proof of concept through monitored market testing. The sandbox activities which shall be tested are those which the Reserve Bank would be able to oversee in terms of the Reserve Bank of Zimbabwe Act, [Chapter 22:15]; Banking Act, [Chapter 24:20], The National Payment Systems Act, [Chapter 24:23]; The Money Laundering And Proceeds of Crime Act, [Chapter 9:24]; Exchange Control Act [Chapter 22:05] and any other relevant regulations. Accordingly, all activities to be tested should have the appropriate regulatory approval.
The list of eligible fintech products or services includes APIs, mobile money services, retail payments, money transfer services, peer-to-peer or marketplace lending, digital KYC, financial advisory services, wealth management services, digital identification services, smart contracts, financial inclusion products, cyber security products, equity crowdfunding, and regulatory technology products. As you can see crowdfunding has always been part of it from the beginning.
Crowdfunding Is Much-Needed In Zimbabwe
Access to capital is a huge challenge in Zimbabwe. This has been worsened by the chaotic economic state of the nation. This is making Zimbabwe less alluring for foreign direct investment. Investor risk when it comes to Zimbabwe is sky high due to the monetary and fiscal flip-flops that rule the day. For the most part, Zimbabwe is being continuously shut out from global platforms. A good example is Zimbabwe’s exclusion from PayPal when it comes to receiving money. Recently World Remit announced it will not be allowing bank transfers to Zimbabwe anymore. These are examples that show how unattractive Zimbabwe is becoming investment-wise. That is why crowdfunding can come in to address that challenge to some degree.
The Good And Bad Implications Of Licensing
On the surface, licensing could seem like a good thing I know. As in, it paints a picture that fintech startups can now easily get licensed to facilitate crowdfunding. After all, licensing primes the licensee to operate legally and efficiently which protects the consumers. However, we are not yet that sure that it is easy to get licensed. Licensing, especially for the financial sector has always been gruesome in Zimbabwe. The other thing is whether or not there will be a guarantee that the regulatory operational requirements will not cripple the respective fintech startups. Thus the central bank must ensure these crowdfunding licensees can operate smoothly. Otherwise,, if we are being honest, crowdfunding is long overdue in Zimbabwe. By now it should be the biggest go-to for entrepreneurs looking for funding.
I have always said that we need our homegrown solutions in Zimbabwe. We need our Zimbabwean crowdfunding platforms so that we move away from depending on global platforms. During the scourge of Cyclone Idai we saw how that dependency can disadvantage us. As for other aspiring entrepreneurs, this is your opportunity to formally enter the crowdfunding space. There more players we have, the better as that will ensure there is quality service provision. I would like to believe by end of 2022 we should be seeing crowdfunding becoming a common thing in Zimbabwe. I also look forward to the RBZ expediting the other outstanding elements in its Fintech Regulatory Sandbox. For example, we are yet to see any meaningful headway regarding digital currencies.