International Journal of Management and Humanity Sciences. Vol.

, 2 (7), 605-618, 2013

Available online at http:// www.ijmhsjournal.com
ISSN 2322-424©2013

In Searchof Remittance Mobilisation StrategiesThrough Formal Channels

In Zimbabwe: a survey of Zimbabweans living in South Africa and
Botswana
1 2
Nathan Mugumisi*, and Nqobizitha M. Ndhlovu

1- Department of Accounting and Finance, Faculty of Commerce, Lupane State University, P O Box AC
255 Ascot Bulawayo
2- Department of Accounting and Finance, Faculty of Commerce, Lupane State University, P O Box AC
255, Ascot Bulawayo

*Corresponding author E-mail: mugumisin@gmail.com

Abstract

This study sought to identify strategies that Zimbabwe can adopt to formally mobilise
remittances from its estimated 4 million migrants. The study was based on a survey of 203
Zimbabwean remittance recipients based in Harare and Bulawayo, and 164 Zimbabwean
migrant workers in South Africa and Botswana. The respondents were selected using
snowball sampling. We found that in Bulawayo and Harare almost 61% of remittances
where received through formal channels. Banks are the least used formal channel of
receiving remittances, and almost half of the recipients are unbanked. The unbanked
recipient cited lack of trust in banks, high transaction and monthly charges, failure to meet
bank requirements, little or nil interest on deposits as reasons why they do not have bank
accounts. When choosing a remittance channel, recipients consider convenience, speed
of transfer, and charges levied. We also found that a considerable proportion of remitters
had no access to banks in host countries, lack of documentation and ignorance of bank
services and products were cited as key reasons for failure to access banks. We urge the
Zimbabwean government to formulate concrete measures of improving financial inclusion,
create remittance linked products, pursue mobile cross boarder money transfers, adopt a
comprehensive diaspora outreach policy, strive to earn trust and confidence of the
diaspora, to establish interbank synergies, remittance databases/websites, and conduct
financial literacy campaigns.

Key words: development financing, diaspora, recipients, money transfer agents, financial
inclusion

Introduction

Migrant remittances have emerged as one of the major sources of foreign exchange flows into developing
countries in recent times. Compared to other forms of transfers and investments, the volume of remittances
surpassed that of Official Development Aid (ODA) in the mid-1990s and is currently second to Foreign Direct
Investment (FDI) (IFAD 2006). Officially recorded remittances to developing countries totaled $381 billion in
2011, and are estimated to have reached $406 billion in 2012, and are projected to reach $534 billion in 2015
(World Bank 2012). Various corridor specific and empirical studies suggest that remittances sent through
informal channels could add up to fifty percent (50%) of the official estimates, making it the largest source of
external capital in many developing countries (ADB 2009).
Ratha (2003) defines remittances as “person to person flows well targeted to the needs of the recipient who
are often poor”. Such transfers are altruistic, and do not have to be paid back. Defining remittances as cash

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Intl. J. Manag. Human. Sci. Vol., 2 (7), 605-618, 2013

transfers is however considered as too narrow, thus Adams Jr. (1991) defines remittances as “money and
goods” that are transmitted to the households back home by emigrants. This research narrowly defines
‘remittances’ as cash or money transfers from migrant workers back to their country of origin. We adopt this
narrow definition because this study focuses on the mobilisation of ‘monetary remittances’ through formal
channels, as an alternative source of development financing in the face of dwindling flows from traditional
sources.
Zimbabwe’s decade long economic melt-down from 1999 to 2009, and political crisis which surrounded the
2008 elections, resulted in massive emigration of both professional and non-professional Zimbabweans to
neighbouring countries and abroad. According to Orozco and Ferro (2008), by 2008, Zimbabwean migrant stock
was estimated to be over 4 million. Zimbabwe in 2009 abandoned its currency after a decade of trying to fight
hyperinflation. Ever since the adoption of the multi-currency system, the economy turned around and the macro-
economic condition stabilised. The new currency regime, among other factors, directly contributed to the
immediate containment of inflation by arresting rapid price movements and putting to an end rapid money supply
growth as well as curtailing speculative activities. However, the new economic order exposed the economy to
serious liquidity challenges. It is noteworthy that, within the auspices of a multiple currency regime, where the
Zimbabwean Central Bank does not issue currency, liquidity sources are limited. Under the multiple currency
system, money supply (foreign currency) is a function of the performance of the export sector, international
capital inflows (FDI and portfolio investments), diaspora remittances, external lines of credit and donor funds
(RBZ 2012). In this respect, the country’s liquidity situation is contingent upon developments on the external
sector front. Given an estimated 4 million Zimbabweans in the diaspora, Zimbabwe has vast potential to harness
remittances for developmental purposes and improving the liquidity levels.
Remittances into Zimbabwe have positive micro economic and social impact on households and the
community at large. Bracking and Sachikonye (2006) found that remittances don’t only reduce poverty, but also
contribute to productive accumulation for households in Zimbabwe. In a study on the impact of remittances on
local development in Tsholotsho, Ncube and Gomez (2011) found that remittances are a major source of
consumption income for households. Households also used the remittances to buy livestock, scotch carts,
sewing machines, agricultural equipment, building modern houses.
While it is evident from above studies that at household and community level, remittances are improving
livelihoods; Zimbabwe at a macroeconomic level is yet to gain the full potential benefits of remittances. This is
mainly because much of Zimbabwe’s remittances come through informal channels. Makina (2007) found that
89% of Zimbabwe’s remittances come through informal channels, while a corridor specific study on the
Zimbabwe - South Africa corridor concluded that 85% of remittances enter Zimbabwe through informal channels
(Burgsdorff 2012). The main objective of this study is to identify strategies that the country can adopt to formally
harness migrant remittances.
Where remittances are measurable, substantial, and fairly predictable overtime, they have been used to
improve a country’s creditworthiness and hence the country’s access to international capital markets (Ratha
2007). The joint World Bank-IMF low-income country debt sustainability framework now allows for more explicit
consideration of remittances in evaluating the ability of the countries to repay external obligations and their ability
to undertake non-concessional borrowing from private creditors (IMF and World Bank 2009). Zimbabwe, a
country with no credit rating and high sovereign risk, desperately needs development funds to revive its industry
and exploit its other valuable resources. Despite having an estimated four million professional and
unprofessional migrant workers, Zimbabwe is not fully exploiting migrant remittances because of the highly
informal nature of its remittance receipts.

The Economic Impact of Remittances at Macro-Economic Level

Remittances are one of the least volatile sources of foreign exchange earnings for developing countries. While
private capital flows tend to rise during favourable economic times they fall in bad times, foreign aid is also
volatile and may depend on political relations; remittances appear to react less ‘violently’ and show remarkable
stability over time Ratha (2003). Remittance flows to developing countries proved to be resilient during the
recent global financial crisis; they fell only by 5.5% in 2009 and registered a quick recovery in 2010. By contrast,
there was a decline of 40% in FDI and a 46% decline in private debt and portfolio flows in 2009 World Bank
(2011). Remittances tend to behave counter cyclically and therefore act as insurance for origin countries
(Chamiet al. 2009), smoothing household consumption and contributing to the stability of the country when
facing macroeconomic shocks. Migrants may increase remittances in times of economic hardships especially in
low income countries where their families depend significantly on remittances. Even remittances for investment
are less likely to suffer sharp withdrawals that characterise portfolio flows to emerging markets. According to the

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World Bank (2001), migrant workers are more likely to continue to invest in home countries despite economic
adversity than foreign investors; an effect that is similar to home bias in investment.

Figure 1. Remittance and Capital flows to developing countries.

Source: World Bank, 2012

Remittances as shown in figure 1 were very stable and constantly rising over the period 1990 to 2008. They
tend to rise when the recipient economy suffers an economic crisis, natural disaster, or political conflict, as
migrants may send more funds during hard times to help their families and friends. Ratha (2007) indicated that
indeed remittances rose during the financial crisis of 1995 in Mexico and the Asian financial crisis of 1998 in
Indonesia and Thailand. According to Ratha et al. (2011), the stability of remittances helps to sustain
consumption and investment during downturns and performing the role of a shock absorber.
It is this relative stability that has enabled some emerging market economies to use remittances as collateral
against which to borrow on international capital markets on substantially better terms than they otherwise would.
Hard currency remittances, properly accounted for, can significantly improve country-risk rating, and thereby
improving access to international capital markets and lowering their cost of borrowing.
Remittances contribute to sovereign creditworthiness by providing a stable and reliable source of foreign
exchange which can reduce current account deficits and improve the external balance of payments position.
Remittances are now being factored into sovereign ratings in middle income countries and debt sustainability
analysis in low-income countries (IMF 2010 in Ratha et al. 2011).The incorporation of remittances in calculation
of debt-to-export ratio can provide a more accurate evaluation of debt sustainability and the amount of fiscal
adjustment that may be needed to place debt on a sustainable path. According to Ratha and Ketkar (2005),
model-based calculations using debt-to-export ratios that include remittances in the denominator indicate that
including remittances in creditworthiness assessments would improve credit ratings. According to Basu (2010)
accounting for large and stable remittance flows can improve sovereign credit ratings of remittance-recipient
countries and enable unrated countries to get rated.

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Table 1. Impact of remittances on country credit rating and sovereign spread

Remittances as Rating Rating including Spread saving
percent of excluding remittances (basis points)
GDP, 2004 remittances
Serbia and Montenegro 7 B+ BB- 150
Lebanon 14 B- B+ 130
Haiti 28 CCC B- 334
Nicaragua 11 CCC+ B- 209
Uganda 5 B- B 161
Calculated using a model similar to Cantor and Packer (1995), see Ratha and De (2005).
Source: Standard and Poors, authors’ calculations.

Another way in which remittances affect international capital market access is through future flow
securitization. According to Shimeles (2009), securitisation is a transaction that involves a potential borrower
pledging future hard-currency receivables as collateral to a special purpose entity that issues the debt. In the
hierarchy of future flows that are amenable to international securitisation, major international rating agencies
rank electronic remittances in the same category as airline ticket receivables, credit card receivables, and
telephone receivables, next only to crude oil exports (Ratha 2003). Zimbabwe, a country with suspended
borrowing rights from the multilateral institutions, and very high sovereign risk can still raise capital from
international capital markets at favourable terms through securitisation of remittances. Securitisation using
remittances can only be done if remittances are properly accounted for and coming through formal channels.
The securitization of future revenues is not new in Africa; in Nigeria, Afrexim bank facilitated a loan of $50
million against flow of remittances through MoneyGram (Shimeles 2009). The investment-grade rating of
securitised transactions makes them attractive to a wider range of “buy-and-hold” investors that face limitations
on buying sub-investment grade (Ratha and Ketkar 2005). Consequently, the issuer can access international
capital markets at a lower interest rate spread and longer maturity.

Table 2. Rating of securitised transactions v normal sovereign rating

Transaction Sovereign
Year Issuer $ million Flow
rating rating
1998 Banco Cuscatl?n 50 Remittances BBB BB
2002 Banco du Brasil 250 Remittances BBB+ BB-
2004 Banco Salvadore?o 25 Diversified payment BBB BB+
rights
Source: Ratha and Ketkar (2005)

As shown above, securitized transactions are normally rated higher than the normal sovereign credit rating of
the issuing countries. A higher rating means access to more funds at relatively lower costs.
In economies where the financial system is underdeveloped, remittances may alleviate liquidity and credit
constraints and help finance small business investments. According to Goldberg and Levi (2008) remittances
contribute to financial markets development, as remitted amounts provide a source of funds for local financial
institutions. They may compensate for an inefficient financial system by helping investors to circumvent the
constraints of the financial system to take advantage of high economic returns that may be inaccessible to them
because of the lack of credit savings vehicles. On the other hand, highly developed and efficient financial
markets may augment the effect of remittances by channeling them into the most productive use.
Empirical evidence from developing countries shows that remittances have reduced poverty at household
level. Cross country level analysis, show significant poverty reduction effects of remittances; a 10% increase in
per capita official remittances may lead to a 3.5% decline in the share of the poor people (Ratha and Mohapatra
2007).
Informal remittances in the long run undermine inclusive governance and democratic state accountability.
Informal remittances also contribute to the ‘informalisation’ of the economy. Informal economic transactions,
while key in sustaining livelihoods, undermine longer-term development in that they reduce government’s fiscal
space, since they represent undeclared incomes which cannot be taxed and also undermines the reliability of
national income figures (Bracking 2003).

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Remittances are not without negative impacts. Countries receiving large and sustained remittance flows tend
to experience an appreciation of their currency, therefore reducing export competitiveness consequently
hampering the growth of the export sector. Makina (2011) highlights that the development potential of
remittances however, outweighs the adverse effects and countries are indeed keen to exploit their diaspora.

Remittances Mobilisation Strategies Implemented in other Countries

Following the realisation of the development impact of remittances, countries world over initiated various
diaspora policies and programmes. Some countries have adopted policies and programmes for supporting
diaspora populations abroad, others including Chile and New Zealand have created diaspora business networks
to help home countries, while others have adopted plural approaches like India (Ancien, Boyle and Kitchin
2009). The diversity in scope of policies across countries is because of the differences in the nature of the
diaspora, economic and cultural conditions in the homeland and the aspirations of the homeland in engaging the
diaspora (Ancien, Boyle and Kitchin 2009).
India, the current largest beneficiary of the remittances, embarked on its first nuclear tests in the late 1990s
and was slapped with economic sanctions. In order to counter the sanctions, India launched a five year bond
called the “Resurgent India Bond”, which was available to non-resident Indians. The bonds offered 2% yield
higher than US Treasury bond of same maturity. More so, the bond had an option of redemption in USA dollars
or German Marks, as well as an exemption from Indian Income and wealth taxes. According to Newland and
Patrick (2004), India raised £2.3 billion in two weeks. In year 2000, India issued another bond, the India
Millennium Deposit which raised over £3 billion.
In September 2000, the Indian government tasked a High Level Committee (HLC) on the Indian Diaspora to
analyse the location, situation, and potential development role of its estimated 20 million Non-Resident Indians
(NRIs) and Persons of Indian Origin (PIO). The committee later released a report in 2002 recommending a “new
policy framework” for creating a more conducive environment in India to leverage their invaluable human
resources world over. The report emphasised the need for an investor friendly environment to attract diaspora
funds, after discovering that many Indians living abroad were keen to fund small projects in their home villages,
but procedural delays and corruption made it difficult to implement their programmes.
A series of reforms and new legislation were announced in response to issues in the HLC report, including the
introduction of legislation to grant citizenship to PIOs in certain countries, measures to ease investment in India
from overseas, and the creation of a liaison government body between India and its diaspora. India‘s Ministry of
External Affairs introduced a “Non Resident Indian and Persons of Indian Origin Division’. India established The
Ministry of Overseas Indian Affairs, which coordinates six instruments of engagements namely: consulting the
diaspora; encouraging investments from overseas; fostering philanthropy; promoting knowledge transfer and
knowledge networks; supporting overseas education; and cultivating and building social and cultural identities
(Ancien, Boyle and Kitchin 2009).
India also established The Investment Information Centre, an agency for advice on almost all issues
associated with investing in India. The centre works with Indians, foreign investors and NRIs, and is considered
the “modal agency” for promoting investment in India by NRIs. It offers several services like explaining
government policies and procedures, available incentives, and assists in obtaining government approval.
India has set up infrastructure connecting the diaspora and their homeland. The creation and supporting of
information flows and portals to foster communication between the homeland and the diaspora is a key policy
adopted by India. The Indian government produces a monthly e-magazine, to inform the diaspora of news,
developments and events in their home country (Ancien, Boyle and Kitchin 2009).
Eritrea a country which had an estimated one million migrants by 2004 (Newland and Patrick 2004) relied on
Eritreans in the Diaspora for funding during their war of independence against Ethiopia of 1961-1991. The
wartime mobilisation was a unique model of political and economic integration. Eritrean citizenship was
extended to members in the diaspora, world over regardless of their legal status in the respective host country.
According to Newland and Patrick (2004) almost all Eritreans voted in the independence referendum of 1993,
and even participated in the drafting and ratification of the new Eritrean constitution in 1997. The constitution
guarantees the rights of overseas citizens to vote.
The flipside of representation is taxation; since independence adult Eritreans have been asked to pay a
voluntary contribution equivalent to 2% of their annual income. There was near universal compliance and
minimal resentment. “Most Eritreans view the tax not as a burden but a duty towards the homeland” (Koser in
Newland and Patrick 2004).
The Ghanaian government started to pay attention to Ghanaians abroad in the late 1990s; previously they
were seen as people who deserted their country and a possible political threat. Marking the change in attitude

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was the 2001 Homecoming Summit which acknowledged the contributions of Ghanaians abroad and aimed to
help Ghanaian migrants and Afro-Americans to rediscover their Ghanaian roots (Vezzoli and Lacroix 2010).The
resolutions of the summit also supported by the creation of online portals; Ghana Opportunity Network, which
provide valuable one-stop-shops to migrants requiring information for potential overseas investors.
From Outside Ghana, efforts to engage the diaspora were more vigorous. The government tried to
institutionalize relations with their diaspora embassies, which promote the work of hometown associations and
other Ghanaian Diaspora organizations. The High Commission in London organizes annual events to
disseminate information to the Ghanaian community about changes in investment procedure and laws. In order
to cultivate trust between the diaspora and government, the Ghanaian government enacted the Dual Citizenship
Act and the Citizenship Regulations in 2001, which allowed Ghanaian citizens to acquire a second nationality
without losing their Ghanaian citizenship (Vezzoli and Lacroix 2010). The dual citizenship initiative was expected
to facilitate the engagement of Ghanaian migrants into Ghanaian local politics, and more efficient management
of their investment in Ghana.
With citizenship rights, Ghanaians abroad engaged the government to allow the diaspora to vote in Ghanaian
elections. Ghanaians abroad felt that they should be granted political rights to match their economic
contributions. Through the Representation of the Peoples Act of 2006, voting franchise was extended (Vezzoli
and Lacroix 2010).

Materials and Methods

The research utilised primary data gathered through interviews and questionnaires. To establish the state of
the financial sector, data was gathered through personal interviews, where face to face interviews with licensed
Money Transfer Agencies (MTAs) and bank officials where done. The interviews were conducted between
November 2012 and January 2013. Participation was voluntary after the research objectives were explained to
the institutions.The study utilised the semi- structured interview method which allows greater freedom to ask
supplementary questions, in case of need, or at times omit certain questions if the situation requires. According
to Kothari (2004) this method allows the interviewer to even change the sequence of questions.
Data from the recipients and senders of remittances was gathered through questionnaires. Data from the
senders was gathered from two main regional migrant destination countries of South Africa and Botswana in
November and December 2012. Zimbabweans in Johannesburg and Pretoria cities of South Africa, and
Gaborone and Lobatse in Botswana were surveyed. Postal questionnaires were also sent and received from
other parts of both South Africa and Botswana mainly using e-mail service. To reach out to the respondents the
snowballing technique was used. Probability sampling could not be used because there is no sampling frame of
Zimbabwean migrants in Botswana and in South Africa. The snowballing technique involved the use of
respondents to identify other respondents through their own networks. The process began by identifying a few
migrants whom we had contacts with, as initial sampling points. Considerable effort was made to ensure that the
initial sampling points were of varied backgrounds in terms of age, occupation, gender and legal status. The
survey included only respondents who were willing to participate after the research objective was explained to
them. Through this snowball referral method, we managed to obtain a sizeable sample.
Data from the recipients was gathered from Bulawayo and Harare, using questionnaires, with the respondents
again deciding to participate after a briefing of the research objectives. Respondents were selected using a
snowballing technique. Trained research assistants administered the questionnaires. We utilised structured
questionnaires in which there were definite, concrete and predetermined questions. The questions were
presented with exactly the same wording and in the same order to all respondents. This form of standardisation
was meant to ensure that all respondents reply the same set of questions. Structured questionnaires are simple
to administer and relatively inexpensive to analyse. The questions were a mixture of closed and open questions.
There could have been selection bias resulting from the fact that news of the surveys (both in and outside
Zimbabwe) was spread, mostly, by word of mouth, emails and telephones. Such a ‘snowballing’ effect may have
resulted in a bias towards a certain income, or age group. In Gaborone we tried to reduce bias by working with
leaders of civil society groups who linked us with Zimbabweans of various age groups and professions. In South
Africa, this challenge was mitigated by targeting a wide range of professions which included nurses, teachers,
security guards, caterers, engineers, domestic workers and other technocrats. This enabled us to reach out to a
wider Zimbabwean population with a diverse background in terms of skills and the earnings. Although the
combined sample of migrant Zimbabweans in South Africa and Botswana is seemingly small, it’s quite
representative in terms of social classifications.

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The process of data gathering was not without challenges, in Botswana some bitter Zimbabweans after
realizing the potential economic benefits of remittances, were labeling us as agents to raise funds for the
President Mugabe’s government and other derogatory sentiments.

Results and Discussion

Statistical analysis for this study was done using SPSS 16. An analysis of the recipient responses indicated
that 61.1% of remittances are being received through formal channels. Of which 28.6% are coming through
Western Union; 11.8% through MoneyGram; 10.8% through Mukuru.com and 9.9% is coming through bank
transfers. While this figure (61.1%) is reasonably high, it can significantly go down in rural and peri-urban centers
because of un-extended facilities. Bank transfers are the least used formal channel; this can be due to the fact
that they are slow (2- 4 days) for the recipient to access the money. Bank charges are also higher; they charge
an average of 22.91% to the sender, and normally there are no charges to the recipient, although Barclays Bank
charges $2 for an incoming transfer. On withdrawal, normal bank charges apply, which can be a further reason
why banks are not popular as a channel for receiving remittances. 45.7% of the respondents felt that bank
charges were too high, and must be reduced in order to persuade them to start using banks.There are
incidences of exchange losses for remittance recipients through bank transfers. For example, if the recipient is
receiving money originating from South Africa in Rand, most Zimbabwean Banks does not issue out Rand
except if the recipient has a Rand account. The money will be converted to dollars for withdrawal at the bank
exchange rate for the day. The bank exchange rate tends to be lower, which may further discourage use of
banks for remittance purposes, as recipients will be avoiding exchange losses.
Analysis of recipients’ responses indicated that 43.9% of the respondents are unbanked, for urban centers
that percentage is too high. 27.6% of the unbanked recipients felt that opening an account in Zimbabwe is
difficult, 10.3% cited lack of proof of income, and 12.3% do not trust banks; especially given that they lost their
deposits on dollarization.
Most recipients indicated that they consider factors like speed, cost, and convenience when selecting the
channel to use receiving remittances. 31.8% consider speed, 24.4% consider charges, and 41.7% consider
convenience. The aspect of convenience considered key by 41.7% of recipients explains why there is still
considerable use of informal channels. In incidences where the recipients are the young and the elderly, using
“Merchants” and “Malayitshas” who deliver at door steps becomes more convenient. Moreover, the recently
emerging merchants are even faster (a factor 31.8 % of recipients consider when choosing channel) than even
the registered MTAs, since they operate telephonically.
On bank usage, 78.2% of the respondents believe that it is possible to increase the usage of banks in
Zimbabwe again. The respondents cited a number of developments that should be implemented to lure them
back to banks. 45.7% of respondents cited that banks need to revise down their transactions charges, 28.3% felt
banks should offer interests on deposits, while 15% and 11% indicated that banks need to improve on efficiency
and design products for the poor of the society respectively, as indicated in the table below.

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Figure 2. Developments to increase bank usage

Any analysis of who selects the channel to use for remitting indicated that 13% of recipients have the ultimate
say, and in almost 32% of occasions the sender and recipient agree on the channel, while 55% of the
respondents indicated that the sender makes the decision on the channel to use.
An analysis of the remitters’ responses indicated that almost 38% of the remitters had no access to formal
banking services. About 48% of the respondents indicated that they had saving accounts with banks in host
countries, while the remainder had other types of accounts.
Almost 60% of remitters use informal channels when remitting. The biggest influence on the channel
selection, from the remitters’ perspective, is the speed with which the funds reach the recipients. Almost 30% of
the respondents would use a channel because it is fast. This is interesting because apart from some merchants,
most formal channels are relatively faster than the informal channels. We attribute this to possible lack of
information on the formal channels by the remitters. It could also be a result of the location of the recipient.
Arguably using the informal channels to send money to a recipient who resides in the rural areas will be much
quicker than using the formal channels due to accessibility challenges.
Most senders are the ones who select the remittance channel when remitting. Almost 65% of the senders
choose the channel to use when remitting, while about 21% indicate it’s the recipient’s choice. This highlights the
need to reach out to the Zimbabweans living and working outside the country as they play a key role in
determining the channel to use.
Most respondents, almost 61%, indicated that they have considered investing in Zimbabwe. We believe that this
is a potential that requires deliberate efforts both at national and at institutional level to attract such investments.
Of note though is that of the respondents who indicated that they have considered investing in Zimbabwe, about
34% actually invested with a total of 66% respondents indicating they did not go on to invest (see graph below).
This could be a result of the relative lack of information on investment opportunities and the process of investing
in Zimbabwe, which ends up discouraging potential investors.
It is also critical to highlight that among the reforms that the respondents felt were imperative to entice them to
invest back home, economic stability followed by the political stability concerns emerged high. The possible
explanation could be that most people in the diaspora left the country during the economic meltdown period and
the perception is that the situation still persists if not having deteriorated. These are critical investment poolers
hence the need for a deliberate effort to address the perceptions of Zimbabweans about their country.

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Figure 3. Reforms needed to lure migrant investments

Of the remitters who do not have bank accounts, about 71% cited lack of proper documentation as the main
reason they don’t have bank accounts while 25% indicated they are not sure of the banking system. It is critical
to note that the documentation process recently done by South Africa has created an extended window of
opportunity for Zimbabweans working there to access the financial services and hence increasing their chances
of using formal channels when remitting. The high proportion of people without documentation is probably
because of the Zimbabweans living in Botswana. Most respondents living in South Africa indicated that they
have a bank account. In addition, we find that 25% attribute their failure to have bank accounts to lack of proper
knowledge of the financial system. Among the possible reasons for this could be the fact that some
Zimbabweans left the country when they were still young while others left the country straight from the rural
areas without any prior knowledge of the financial sector.
We believe that among the contributors to the reluctance to have an account back home is the fact that they
cannot access their bank accounts from their respective countries of work. A total of about 76% indicated that
they could not access their bank accounts while almost 24% indicated that they could access their accounts.

Policy Implications and Strategies

The statistical analyses of recipients’ and senders’ responses have a number of policy implications, for
Zimbabwe. A general review of successful policy initiatives around the world indicates that the most effective
way of bringing remittances into formal channels is to make the latter more accessible, cost effective, timely and
safe for both senders and receivers (UNDP 2010). Besides strengthening financial infrastructure, Zimbabwe
needs to pursue strategies to reach out to the diaspora, and to earn their trust and confidence, given that some
of Zimbabwe’s migrants have a refugee and asylum seeker background.

Increasing financial access of households

Given that 43.9% of the recipients lack access to formal banking system, there is greater need to increase
financial inclusion. The analysis on, who chooses the method of remitting, indicated that 45% the recipients are
part of the decision (13% ultimate and 31.5% in agreement with sender). This means that measures aimed at
increasing financial inclusion of the recipients may help increase remittance flows through banks as it will include
the banks as a possible choice for recipients. Financial inclusion will not only help in formally harnessing
remittances, but will encourage them to save and invest part of the remittances as well as establish a deposit
record which will help them obtain other benefits of the financial system.
The following are some strategies we propose for financial inclusion;
 The financial sector in Zimbabwe should develop or create innovative products such as remittance linked
consumer or housing and insurance products to encourage recipients to use banks for remitting and to save

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part of remittances. Consistently receiving remittances through banks will establish for the recipient a proof
of steady income which will help them obtain other benefits of the financial system. The steady stream of
remittance receipts can be used as a factor in evaluating the creditworthiness of recipients for micro-loans,
consumer loans and small business loans. Such products will encourage increased remittance flows through
banking channels.
 We recommend financial institutions to develop deliberate strategies to increase facilities to the unbanked.
Among the constraints noted in having bank accounts are the requirements most banks demand for one to
open an account. 27.6% of the recipients indicated that they do not have bank accounts because opening
an account is difficult. We propose that these requirements be relaxed such that one can open an account
with just an identity document and proof of residence. Some banks like CABS have such accounts as
‘TEXTA cash account’ which only requires an Identity document and proof of residence. Surveys in the
financial sector indicated that ZB bank has designed accounts for kids, senior citizens and even for vendors,
other banks should emulate that. We also urge banks in Zimbabwe to market such products for the
population to be aware of their existence.
 We recommend that banks lower bank charges. Zimbabwean bank charges are among the highest in the
SADC region and we believe this is not in the interest of financial sector growth and the economy as a
whole. While we appreciate the challenges faced by banking institutions as a result of the transitory nature
of deposits as well as the relatively low deposit base, we feel heavily taxing those who use the banks is not
the ideal way forward but rather increasing the number of people using the banking services is. We envisage
that as more people have access to bank accounts, a part of remittances received will pass through the
financial system and possibly some of it invested.
 We also recommend that banks lower transaction costs associated with facilitating the transfer of funds to
recipients in Zimbabwe. One way to lower charges is through allowing competition, by encouraging the entry
of new legitimate operators in a given corridor. The cost of sending money has been more than halved since
1999 in the US–Mexico remittance corridor due to increased competition.
 We also recommend the government to pursue mobile cross border money transfers. In most developing
countries Zimbabwe included, mobile money transfer services have transformed the landscape for domestic
remittances. In Zimbabwe the introduction of Eco-cash and One Wallet facilities have vastly led to the
financial inclusion of the less well-off, some are now using it for savings. In Kenya, Safari.com entered into
partnership with Kenya’s Equity Bank to launch a mobile savings account called M-Kesho.
 Zimbabwe already has vast coverage for Eco-cash and Econet can launch mobile cross border remittances
in partnership with MTAs like Western Union, Mukuru.com and MoneyGram. The facility can utilise the
already existing Eco-cash points as collection points even for cross border money transfers. There is a lot of
potential for mobile cross border money transfers; given that Econet has vast coverage in fifteen countries in
Africa, Europe, America and Latin America. Some telecommunications firms that operate across countries
now offer cross boarder remittances. In East Africa, Zain Zap in partnership with Citibank and Standard
Chartered, allows its customers to send money to any bank in Kenya, Tanzania and Uganda and receive
money from any bank in the world.

Interbank Synergies
We also recommend that that the Reserve Bank of Zimbabwe and other central banks in the SADC region
work together to share experiences and facilitate in coming up with cost effective corridors for remittance flows.
We believe this is in the best interest of the region and the respective economies because it enhances
accountability and also offers a chance for such remittances to play a role in the economies. Some governments
have collaborated to create efficient remittance channels. An interesting multi-governmental initiative is the
Directo a Mexico, a 2001 initiative between the US Federal Reserve and the Banco de Mexico. The initiative was
meant to explore the possibility of linking payment system across borders to create an efficient integrated
system. It was first to facilitate pension payments to Mexican recipients, but was quickly extended to all
commercial payments. Consumers using Directo a Mexico pay one of the lowest fees of less than $5 per
transaction regardless of the amount remitted. Moreover the remittances arrive safely, timely, and more
efficiently than traditional MTAs (Agunias and Newland 2012).

Remittance database
It is also critical that Zimbabwe intensify efforts to have proper records of remittances. The World Bank 2011
Factbook indicated that Zimbabwe does not report data on remittances in the IMF BOP statistics, despite having
a massive pool of migrant workers who support families in Zimbabwe. We urge the Reserve Bank of Zimbabwe

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Intl. J. Manag. Human. Sci. Vol., 2 (7), 605-618, 2013

to compile remittance data reported by commercial banks, MTAs and Zimpost. It is vital to note that Zimbabwe
cannot improve its credit rating using the New Debt Sustainability Framework for developing countries unless, if
it develops a proper record of its remittance receipts.

Remittance websites
Zimbabwe should consider setting up infrastructure connecting the diaspora and their homeland through
creating and supporting information flow portals. Such portals or websites will inform the diaspora about
investment opportunities, updates in investment laws and procedures. The website can also be used to display
and compare transaction charges of various remittance services providers. In Mexico, Remesamex allows
remittance senders to compare fees for a wide range of money transfer companies. The Netherlands ministry of
Foreign affairs supported the creation of the Geld NaarHuis, a website which compares the remittances services
offered by banks and MTAs, including the costs charged for various destinations. This is a measure which may
be very helpful to keep potential investors and remitters informed, given the increased use of internet via mobile
phones.

Financial literacy campaigns

We also urge the government of Zimbabwe to initiate financial literacy awareness programs to migrant
workers, as a way to encourage the use of banks and other formal financial institutions. This is a reasonable
initiative given that 25% of the migrant workers indicated that they do not have bank accounts because they are
not sure of how to use banks. In 2008 the Philippines’ embassy in the Republic of Korea initiated a financial
literacy campaign to maximize the potential benefit of diaspora remittances to national development. An
assessments of the campaign’s effectiveness after a number of seminars suggested that participants’ financial
literacy and money management skills improved (Agunias and Newland 2012). In Africa, Burkina Faso through
the High commission of Burkinabes Abroad also conducted similar campaigns in Togo and Senegal where bulk
of their migrant workers are. Zimbabwe can do similar campaign to its migrants in popular destinations of
Botswana and South Africa.

Documentation
We urge the government of Zimbabwe to initiate a similar process that has been undertaken in South Africa of
documenting Zimbabweans with Botswana so that Zimbabweans living there can be properly documented and
as such facilitate their access to financial services and open better opportunities for the migrants. Data from
senders indicated that the proportion of Zimbabweans without documentation higher is higher in Botswana than
in South Africa. Internally the Zimbabwean government should also consider revising the price of obtaining the
Zimbabwean passport. Considering the current monthly income of most Zimbabwean workers, $53 is relatively a
high price for a passport. In order to realise more benefits later the Zimbabwean government should consider
moves for documenting its migrants and potential migrants.

Diaspora Outreach
In order to harness remittances, Zimbabwe needs to develop a comprehensive outreach policy aimed at the
migrant community regionally and abroad, as the first step in addressing linkages between the home country
and the Zimbabwean diaspora. Agunias and Newland (2012) indicated that although there is no one size fits all
policy approach to engaging Diasporas, in a diaspora engagement strategy the government needs to be clear
about its goals so that it can design the correct instrument.
Moreover, the government is more likely to set realistic goals for diaspora engagement, if they consult with
diaspora members when setting the goals. The consultation and involvement of Diasporas will instill a sense of
policy ownership and may increase participation. Mexico established a Consultative council of the Institute for
Mexicans Abroad composed of leaders of elected diaspora community group (Agunias and Newland 2012). The
council makes recommendations to the government about its diaspora policies. Zimbabwe needs to recognize
various diaspora organisations. According to UNDP (2010) most of Zimbabwe’s Diaspora organisations are
focused on development of the home country. Examples are the UK based Zimbabwe Diaspora Development
Interface, and the Zimbabwe diaspora Development chamber based in South Africa. We urge the Zimbabwean
government to engage and embrace such organisations as development partners.
With clear goals set, the next logical step for the government in engaging the diaspora is knowing the target
population (Agunias and Newland 2012). This involves data collection, mapping the location of the diaspora,
their skills and experiences, understanding what they are willing to offer and what the diaspora expect in return
from the government. India dispatched its HLC to analyse the location, situation, and potential development role

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of its estimated 20 million NRIs and PIO. Zimbabwe took a similar step in 2004 when the Reserve Bank of
Zimbabwe dispatched a team to USA, South Africa, and the UK, led by Eric Bloc to engage the diaspora to
invest in Zimbabwe (UNDP 2010). We propose that as a country we establish a permanent institution, tasked
with engaging the diaspora and mandated to conduct a thorough and rigorous exercise in all major regional and
international destinations. Building real partnerships with the diaspora and engaging in productive dialogue and
co-operation can be a lengthy and complex process. The government needs to create specific institutions in
charge of working with the diaspora, design websites to reach out to the expatriates. Internet is the most
common tool to reach out to the diaspora.

Building confidence of the diaspora

The process of building partnerships between the government and diaspora is more likely to succeed if it’s
built on a good foundation of mutual trust and communication (Agunias and Newland 2012). The symbolic
inclusion through dialogue and communication needs to be backed through rights and partnerships in order to
build trust and collaboration. Strong measures need to be adopted for the diaspora to regain trust of the
government of Zimbabwe and its institutions, before engaging the diaspora can bear envisaged benefits. There
is hostility between the Zimbabwean government and some diaspora groups (UNDP 2010). Political violence
and victimisation were major push factors for migration, so most of the migrants settled as refugees or asylum
seekers. As a result most diaspora organisations are human rights organisations that are skeptical of the
government of the day and hence lack the requisite trust that will be needed. Below are measures we propose
can be taken to build confidence of the diaspora’
 Establishing a conducive business environment - This may involve improving transparency in regulation and
business licensing requirements and consistent application of property laws. The diaspora, like any other
investors require a conducive business environment, a sound and transparent financial sector, rapid and
efficient court systems, and a safe working environment to lure them to invest back in their country of origin.
We urge the Zimbabwean government to simplify bureaucracy in business registration and implement
policies to maintain macroeconomic stability, so as to lure the diaspora to invest in Zimbabwe. De Haas
(2005) emphasizes that bad infrastructure, corruption, red tape, lack of macroeconomic stability, trade
barriers, lack of legal security, and lack of trust in government institutions affect migrants’ decisions to invest
in their home countries.
 Dual citizenship - Under the current laws of Zimbabwe, an emigrant who acquires citizenship of another
country, or alternatively who stays outside the country for seven years consecutively, loses their
Zimbabwean citizenship. We suggest that Zimbabwe should amend such a regulation and allow dual
citizenship, it helps to open up opportunities for migrant workers, while keeping then bonded or attached to
their country of origin. Dual citizenship formalises the stay of migrants in host countries, and even allow then
access to the financial system. Countries like Ghana and Eritrea, as a shown above have passed some
flexible citizenship laws, allowing their diaspora to acquire dual or multiple citizenships. We do take note and
applaud such efforts in the draft constitution and if the constitution sails through, we believe the new piece of
legislation will go a long way in involving the diaspora in local issues.
 Voting rights-The Zimbabwean governments can also earn trust of the diaspora by facilitating overseas
voting rights and other forms of political participation for expatriates. Currently Zimbabweans living outside
the country do not enjoy voting rights. Voting and political rights will instill a sense of belonging and
engagement with the country of origin. The right to vote from abroad offers the diaspora access to home
country’s political decisions and have their specific interests represented. Zimbabwe should consider
allowing migrants the right to vote from abroad without having to return home to exercise such right.
Migrants who stay abroad should be allowed to register to vote at the embassy or consulate in host country
and vote by mail.

Diaspora Bonds
Zimbabwe can also issue a diaspora bond; which is a retail savings instrument marketed only to members of
the diaspora. Diaspora bonds can be an effective tool for tapping diaspora wealth, marketed through the
country’s consular network. Through selling diaspora bonds of small denominations, Zimbabwe can tap into the
wealth of relatively poor migrants even in regional destinations. It is more likely that diaspora investors may be
willing to buy diaspora bonds at a lower interest rate than demanded by foreign investors for patriotic reasons.
It is crucial to note that like any other investors, diaspora investors are concerned about the government’s
willingness and ability to service the debt. The Zimbabwean government should note that factors such as
government reputation, the rule of law, and the protection of property rights affect the diaspora’s decisions to

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invest in their home country. Zimbabwe as indicated by UNDP (2010) needs to work to regain the confidence of
Diasporas. Following incidences of intrusion of foreign currency account of churches, organisations and
companies, Zimbabweans lost confidence in property rights of Zimbabwe.
Moreover diaspora bonds have a greater chance of success if the proceeds are earmarked to finance projects
in which diaspora members are interested. Therefore before launching a bond, it is advisable that the
Zimbabwean government hold consultations with diaspora groups. To be able to do so Zimbabwe as was
indicated need to build a knowledge base about the location, size, income and wealth characteristics of diaspora
groups through a diaspora outreach.

Suggestionfor Further Study

Future studies can consider the feasibility of adopting mobile cross border money transfers. Other studies can
also focus on designing remittance linked banking and insurance products. Further studies can focus on the
broad motives and reasons for remittances as well as factors which determine the frequency of remitting.

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