Minister of Information, Communication and Technology and Courier Services, Supa Mandiwanzira, says Zimbabweans have lost trust in banks because of bank failures and cash shortages in the economy.
Speaking at the Mobile Money and Digital Payments Conference last Thursday, Mandiwanzira said the country did not have a cash crisis, but a confidence problem.
"There is no confidence in a cashless society. This just means people do not trust banks and withdraw their money as soon as it reflects in their accounts. After the bank failures we all witnessed in the last decade, you cannot blame them," he said.
Zimbabwe adopted a multiple currency regime in 2009 to escape hyperinflation. However, the country plunged into a foreign currency crisis last year as its trade deficit continued to widen while overall output declined. Government borrowing also increased, crowding out the productive sector.
Bank closures and abuse of depositor funds have led to erosion of trust and confidence in the financial system.
Mandiwanzira said if trust and confidence issues were not addressed, Zimbabwe would continue to experience cash shortages.
"The country also needs to have trustworthy and reliable mobile payment solutions so that people will have confidence in receiving money in that form instead of getting cash," said Mandiwanzira.
Delegates at the conference said banks need to be reliable in terms of their systems and service offerings. In Zimbabwe, reliability particularly in terms of cash management and banking system performance, needs to be addressed.
Mandiwanzira said if there was no confidence that customers could withdraw the cash they want, they would desist from depositing with banks.
The cash shortages are being experienced at a time when bond notes continue to lose value against the United States dollar, with the US dollar not readily available on the open market.
According to figures released by the Reserve Bank of Zimbabwe in June, commercial banks held just $65 million physical foreign currency notes, bond notes and coins at the end of May, highlighting a mounting cash crisis that has wracked the economy since early last year.
The diminished stock of notes and coins in commercial bank vaults represents less than one percent of total bank deposits. Experts say physical cash should be between 15 percent and 20 percent of bank deposits.
Physical cash holdings averaged $300 million per month between 2013 and 2014, Reserve Bank of Zimbabwe figures show.