The biggest beneficiary from local money transfers has always been the sender and receiver, but that may soon change following the recent Presidential Announcement that all domestic foreign currency transfers will now attract the Intermediate Monetary Transfer Tax (IMTT) of 4 percent.
It could soon be cheaper to jump on a bus and transport the money yourself that to use one of the many formal Money Transfer Operators (MTOs) who allow clients to send and receive USD between any two points within the country.
Before the announcement, the most expensive service is currently Mukuru which charges 7 percent and the rest are between 3 and 5 percent. The new measures could therefore see charges go beyond the 10 percent mark for some of the MTO’s meaning that to send someone $100 it could cost as much as $10, putting this mode of money transfer out of the reach of most Zimbabweans and pushing them to seek out informal channels once-again.
The average Zimbabwean sending money locally is doing so to supplement the income of relatives and loved ones back home. Keeping the cost of personal remittances low is therefore important for the survival of many families. Firstly, it puts more money in the pockets of those sending money to relatives within the country. Secondly, it will increase flows through formal channels.
Thirdly, it will improve financial access for the most vulnerable segments of our society. High fees place a financial burden on the remitters and on the recipients of the remittances, who receive a smaller amount of the much-needed funds sent by their family members.
The cost of the transfer is usually not an issue in larger remittances, because, as a percentage of the principal amount, it tends to be small. But for small, personal transfers, say for someone sending $20 to Rusape for school fees, the remittance costs should be kept as low as possible.
A survey conducted over the last 48 hours after the announcement saw MTOs confirming a sudden spike in volumes as people rush to pay school fees and send money for groceries before a sector-wide increase in charges that the market sees as imminent.
