How EcoCash could have been Zimbabwe’s Credit scoring saviour

There’s a metric I often turn to when contextualizing why it’s so hard for businesses to operate in Zimbabwe (and sometimes broader Africa). Poverty levels are significantly high with 64.5% of the population earning less than $3.65/day which results in an economy where majority of consumers cannot afford to pay outright for essential items such as mobile phones, home furniture and appliances and vehicles. This inability to spend is compounded by the fact that there are very few credit options available to ordinary Zimbabweans which means if you fancy something you're more often than not having to pay for it all at once...

At its core, credit facilitates increased consumption and investment. It benefits different sectors of the economy in different ways. For businesses, credit allows them to finance their operations, expanding production, invest in new technologies, and innovate. For consumers, credit allows them to purchase goods and services that they need or want, such as housing, education, health care, and leisure. For governments, credit allows them to fund public spending, such as infrastructure, social services, and defense. A well-functioning credit system expands the productive capacity of an economy, boosting overall output and generating wealth - precisely what is missing in most developing countries on the continent.

“With better access to consumer credit facilities, people in the low and middle-income class will have a better opportunity to afford items that improve their lifestyles and livelihoods. For example, the woman who sells cold drinks by the roadside, packed in a cooler along with blocks of ice and makes less than $100 in monthly profits is unlikely to afford outright payment for a freezer. However, with access to consumer credit facilities, she can buy a freezer which will serve and grow her micro-business and, more often than not, also eases household cooking chores.”

Fehintolu Olaogun CEO and Co-founder, CredPal | World Economic Forum

Credit also has some challenges and risks associated with it. Ensuring that it is available and affordable for those who need it, especially for small and medium enterprises (SMEs) and low-income households is one such issue and the one we will be mainly focusing on today... Other challenges include regulation of the credit market to prevent fraud, abuse, and predatory lending practices. One of the main risks is that credit can create excessive debt and leverage, which can lead to financial instability and crises. Another risk is that credit can fuel inflation and asset bubbles, which can distort prices and allocation of resources.