In his mid-term monetary policy statement, Reserve Bank of Zimbabwe (RBZ) governor John Mangudya directed all banks operating in Zimbabwe to submit financial inclusion plans for the next three years.
BY MUNYARADZI NYAKWAWA The banks have been given until December 31 to submit board approved financial inclusion plans to the central bank. The central bank further stated that going forward, it will not license new banks that do not have a clear, board approved financial inclusion strategy.
Given the current economic environment and our recent banking history, I strongly feel this is a noble cause by the governor.
Financial inclusion allows for majority of the population to participate in economic matters. Research has shown that financial inclusion leads to economic growth.
Where do we start? What is our national policy on financial inclusion?
National Strategy In his address on the occasion of the third Zimbabwe SME Banking & Microfinance Summit 2015, Director Bank Supervision [RBZ] Norman Mataruka said, “The Finscope Consumer Survey 2014 results revealed that Zimbabwe has achieved great strides in expanding financial inclusion since 2011. The 2014 results showed that 23% of Zimbabweans are financially excluded, a reduction from 40% in 2011 . . .”
The question then is, what is our target? What do we want to archive as a country and by when? In February 2012, Zimbabwe became the 86th member of the Maya declaration. It’s, however, saddening to note that to date we have not come up with a national strategy on financial inclusion. The purpose of the National Financial Inclusion strategy is to ensure that a clear agenda is set for increasing both access to and use of financial services within the defined timeline. The Maya declaration sets 2020 as the target year.
The design of a financial inclusion strategy is a strong demonstration of leadership at the government level and leadership is one of the G20 Principles for Innovative Financial Inclusion, which appeals to “cultivate a broad-based government commitment to financial inclusion to help alleviate poverty,”
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With a national strategy, it will be easy for banks to then design and come up with documents that are in line with the national targets. If the national strategy is to reduce financial exclusion to 10% by 2018, then we would expect all bank plans to be in line with this target.
Bank strategy Without the national targets, it will be interesting how banks are going to come up with their own financial inclusion documents. I can foresee every bank coming up with a different target altogether. A national strategy would help set up the guidelines on matters to be included in their documents. I would personally want to see how banks would address the following in their master plans:
Barriers to Financial Inclusion: Demand-side barriers, which brought about various reasons, including low and irregular income, lack of employment and low literacy levels.
Supply-side barriers: This is a major problem in Zimbabwe considering the bank crisis in the recent past. Supply side barriers are brought about by long distance to access a bank branch, high cost of services (even the ZimAsset quick wins states that the government will be “providing social protection measures to vulnerable groups, including removal of user fees for selected population groups. We need to find ways to remove the bus fares that pensioners are paying to get to the nearest bank branch to access their pensions). Maybe mobile money can come in as a solution like what happened with Afghan police.
Regulatory barriers: Lack of priority sector lending policy which is exposing the poor to loan sharks and lack of targets for the national financial inclusion strategy.
Strategies for achieving the financial inclusion In the absence of national targets, I would assume banks will come up with their own micro economic targets that will feed into the macro picture, assuming national targets will be drawn from there.
I would expect banks’ strategies to cover the following, among other things: Agent banking: Agent banking is the provision of financial services to customers by a third party (agent) on behalf of a licensed deposit taking financial institution. It is the delivery of banking services outside traditional bank branches, through additional touch points such as existing retail stores and petrol stations or via technology such as point of sale devices and mobile phones.
The use of micro ATMs may come in handy under agent banking as they do not require a huge capital outlay to set up. At this stage, the banks should also come up with Know Your Customers’ policy initiatives. Cash Lite: In mobile banking, this is access to financial services through mobile phones that are directly linked to a bank account.
Relationship models: There are currently a total of 20 operating banking institutions, including the People’s Own Savings Bank, with over 300 branches, and there are 147 microfinance institutions (MFIs) with 473 branches. The relationship or linkage model will enhance co-operation between deposit-taking institutions (banks), MFIs, government and non-government organisations to improve access to the bottom of the pyramid. Linkages can also come in the form of Mobile Network Operators (MNOs), MFIs and banks.
Financial literacy: Financial literacy is the bridge between financial inclusion and sustainable financial inclusion. Banks should come up with strategies on how to increase bankability of the population through coordinated national financial literacy initiatives that are complemented by consumer protection. Savings and insurance: How can banks take advantage of the cheap deposits? How are they going to help formalise the village savings and loan associations and the savings and credit co-operatives?
With the little that comes in as savings, it will be easy to finance domestic investment, no matter how small. In an economy like Zimbabwe, any form of investment that creates employment even if its self-employment is sustainable. Women: We expect banks to come up with gender-based financial inclusion strategies
Conclusion If financial inclusion increases welfare at a micro economic level, it therefore follows that financial inclusion leads to economic growth assuming GDP is a measure of welfare. It is consequently imperative that the government should come up with a national financial inclusion policy and strategies, a policy that will guide the nation and all financial inclusion participants.
Munyaradzi Nyakwawa is a digital financial services consultant and financial inclusion analyst. He can be reached on [email protected].
