Financial inclusion is no longer an academic proposition, it is now a development agenda. Advocates and researchers have finally realised that exclusive growth is not sustainable.
Research has shown that just 62 people now own the same wealth as half the world’s population, a crazy statistic, but true. It is, however, not surprising that some of the top 62 are already investing in financial inclusion programmes because they understand that exclusive growth leads to inequalities and is not sustainable even for their businesses.
The Bill and Melinda Gates Foundation is funding a lot of financial inclusion programmes in different countries as a philanthropic exercise, but, imagine what would happen if people are educated about finance at a tender age and they become financially literate? How much will they spend on computers once they are financial independent? Companies in Zimbabwe need to realise that they can do well by doing good. Financial inclusion is now a development agenda and every sector of the economy must contribute.
At the recent world economic forum at Davos, it was no surprise that financial inclusion took centre stage. The agenda at the forum was to get world leaders to discuss how finance and technology can be tied together to create inclusive growth of economies and reduce inequality. Reducing inequality is one of the 2030 sustainable development goals.
It is, however, encouraging to note that as a country, we are moving in the right direction and we have also contributed to reducing financial exclusion. The Global Findex 2014 data showed that from 2011 to 2014, the number of the financially excluded people dropped from 2,5 billion to 2 billion. This time period coincides with the period that Zimbabwe launched four mobile money services and there was also an increase in the number of microfinance institutions.
Davos raised the following as key to the financial inclusion agenda:
Organisational adoption of digital financial services a catalyst to financial inclusion
One of the hot topics that came out of Davos 2016 is, growth through partnerships. There are many organisations at all levels delivering great work with a social goal today, financial inclusion is a greater social goal. Zimbabwean companies can learn a lot from Davos 2016. For example, as small businesses sign up for merchants and point of sale machines, usage leaves a digital footprint.As such, they will naturally tend to experience an expanded access to credit for working capital (when they approach micro finance institutions or banks), which they could not do before the partnership. Digital finance provides data.
Over and above payments, as a social objective, companies can start paying wages through digital accounts. Most individual tend to misuse salaries that they receive as cash. Research has shown that salaries paid electronically stand a better chance of being saved and put to good use than salaries and wages that are paid in cash.
Opening an account is not financial inclusion
It is important to note at this stage that digital is only an enabler and not a solution to financial inclusion. In recent years, the government has made major strides in ensuring technological improvement as well as showing government commitment to financial inclusion.
Progression in financial inclusion is through building, maintaining and evaluating an enabling ecosystem that includes policy, regulations, strategy and infrastructure to support the continued use of digital money. Depositing money in an account (mobile or bank) and withdrawing it at the other end of the transaction is not financial inclusion. Thus, the need for an ecosystem.
The size of the deposit on mobile money accounts in Zimbabwe as reported by Potraz, inasmuch as it is an indicator of financial inclusion, does not tell us whether we have really reduced exclusion. There are a lot of people who are using accounts as a vehicle to receive a deposit and then they promptly cash out. These people still remain excluded because what they have really done is to substitute the kombi (which they were using to send money) with a faster and reliable channel. There is need for an ecosystem to ensure sustainable financial inclusion.
Davos 2016 financial inclusion objectives in summary
“The Financial Inclusion initiative aims to play a leading role in identifying, shaping, and seizing the highest-potential opportunities to accelerate progress towards full financial inclusion by catalysing and facilitating public-private collaboration across a portfolio of country-level and global partnerships. While each partnership aims to accelerate progress towards full financial inclusion through digital payments, each has a unique set of objectives, governance structure, and work plan, depending on the local situation. Current partnerships leverage cross-industry and cross-sector collaboration to help create cash-lite ecosystems through ubiquitous, low-cost digital payments, enabling data-driven underwriting and distribution models to deliver affordable, multi-product offerings, including payments, transactions, savings, credit and insurance to lower-income customers.
Aligned to the Universal Financial Access 2020 campaign, the project supports a subset of the 25 countries identified by the World Bank where need is high and the Forum’s members are well-positioned to drive change. As the project matures, it will work within existing regional platforms to facilitate thought leadership, knowledge exchange, and endorse country-level partnerships.
The initiative engages a variety of stakeholders, including financial services and telecommunications providers, to retail and consumer industries, local and international development institutions, civil-society organisations, regulators, policy-makers and academia. Partnerships are developed and explored through research and analysis as well as the facilitation of interactive dialogue between key stakeholders during steering committee and working group meetings, regional summits and the annual meeting at Davos.”
Where do we stand as a country? Are we financially included or are we not?
Munyaradzi Nyakwawa is a digital financial services consultant and financial inclusion analyst. He can be reached on email@example.com or on LinkedIn