The financial inclusion story in Zimbabwe has always been about access to an account from which one can transact.
By Munyaradzi Nyakwawa
It can be an account with the bank, building society, microfinance institution or mobile money. It is also a fact that an account alone is not good enough; people need insurance, people need financial education for the country to achieve its financial inclusion targets.
Every last day of the month my mother and other villagers leave their houses dressed in uniforms, to meet for more than three hours under a tree. No one dares to miss this burial society meeting. They are not alone, Finscope survey states that there are 76% Zimbabweans who are members of such societies.
Burial societies bind the communal spirit. The origins of burial societies dates back to the colonial era when access to mortuaries and funeral policies were a preserve of the whites. Burial societies have stood the test of time and it is time we looked at them as vehicles for financial inclusion.
Burial societies remain an informal form of insurance, but they are still popular. There is no doubt that some citizens who have formal funeral insurance policies, are still members of burial societies.
There were issues of trust with allegations that treasurers lined up their pockets at the expense of the contributors.
Contributors felt the need to cultivate close relations with the executives so as to get better services at their funerals. This was because there are no defined standards on the benefits. In general, burial societies in Zimbabwe operate largely at the margin of the formal financial services sector.
This area is unregulated and leaves customers or contributors vulnerable to shoddy service and unfair treatment in terms of pricing and service.
A particular limitation to burial societies is that they operate strictly within the family or community where the contributor or beneficiaries live, and hence require the contributor to rely on people in similar circumstances.
Secondly, while burial societies offer high pay-outs from low premiums, they usually do not have the strength or capacity to deliver them. This is because majority of them remain financially excluded and lack the basic financial literacy to help them make financial decisions with their member contributions.
Migration also causes inconveniences to burial societies as one requirement of burial societies is that they should meet always and discuss issues. However, this is not always feasible and may be costly to the group. As people migrate the family or community bond that initially brought the group together may be affected, thus affecting trust, which is the core of all burial societies.
One of the reasons why my mother is a member of a burial society is because she does not want the family to be in debt in the event of one of us passing on. Noble cause, but there is no guarantee that she will get the money; what if more members of the group accidently die at the same time, will the burial society have the capacity to pay out to all the families?
I strongly feel it is high time that government found ways of formalising these groups to guarantee pay-outs.
Formalisation comes with regulations, and regulations will help remove the unscrupulous elements in the burial societies system. Formalisation opens up the burial society to formal financial system and such savings will improve domestic resources mobilisation; there is a lot that is being stored at home that can be used in the formal economy.
Financial literacy will educate the community that instead of keeping the funds at home, burial societies can open accounts and make deposits.
One easy account to open is the mobile money account (mobile money now has group accounts). Mobile money will eliminate the problems that have always been caused by migration. By using mobile money, trusted companions and family members may be included in burial societies, regardless of location.
Using mobile money removes exclusion and can increase savings from that person’s continued contribution through remittances to Zimbabwe for that purpose.
Mobile money will eliminate exclusion from the group as well as national economics. How about the problems associated with capacity and strength of burial societies? Members trust that they will be assisted when they die but do not have the guarantee that they will indeed get paid.
Micro-insurances provide a solution for the burial societies as they ensure that premiums are kept low while pay-outs are high.
For micro-insurances to be relevant and convenient, they normally have to ride on mobile money platforms for easy of collections, as well as sending funds to the insurance company. Micro-insurance is the protection of the bottom of the pyramid against specific exposures in exchange for a small premium payment.
We are in a peculiar situation as a country; our official development assistance is going down. Burial societies have been saving informally yet we need these savings in the formal economy.
If 76% of Zimbabweans are members of burial societies, consider the impact of such funds on the economy if they are formally introduced in the economy. Burial societies have the potential to increase remittances to Zimbabwe albeit in small percentages, but at the moment Zimbabwe needs every dollar that comes our way.
l Munyaradzi Nyakwawa is a digital financial services consultant and financial inclusion analyst. He can be reached on munyaradzi.gerald.nyakwawa @gmail.com or on LinkedIn