Do not underestimate the impact of poverty (mass) banking on financial inclusion as well as on economic development. Development and growth have two different meanings and cannot be interchanged. economic development is more inclusive than economic growth, that’s my take.
by Munyaradzi Nyakwawa
Back in the day in Zimbabwe there was a bank that had a soft spot for the bottom of the pyramid. I remember the majority of the people that I interacted with in the ghetto had that famous book, the youth, the toddlers and even the grandparents had the book. I remember my grandmother calling it “book bank”. It took me years to appreciate that it was a bank book.
I value the fact that by the time I got to secondary school, I had my personal account with this bank. This bank used to have mobile branches and I vividly remember those T35 trucks that were nicely branded to match the banking standards then. The service was exceptional and you always felt like you were in a “real” bank.
Fastforward two decades later, the same bank doesn’t look like the old bank that used to go deep down into the rural areas to serve customers. I don’t know what happened to the mobile banking halls but I am of the opinion that they are more relevant now than they were then. Coincidentally, it is more than two decades ago since Bill Gates notably said that “banking is necessary, banks are not”. In other words, he was saying people need banking but not the brick and mortar infrastructure.
The truth of the matter is banks will never go anywhere, but recent developments in the industry have shown that non-banking institutions like telecommunications companies are just as capable of offering banking services. The results have shown that banks that continue to be traditional not only in Zimbabwe but the world over, continue to suffer from diminishing profitability.
Profitability is affected by the low-interest-rate environment and low savings culture, especially in Zimbabwe. The problem is exacerbated by disintermediation; this is obviously the other side of the intensifying competition coming from digital finance and mobile money.
Banks that have survived this declining profit environment have done so through changing their models. The majority of those that have had notable positive developments, have opted for agency banking. There are two ways in which the banks have managed this.
One way is to integrate with a mobile money service provider and make use of their existing agents, thereby decongesting the banking halls, at the same time providing service conveniently to their valued customers.
The second is where a bank like my old bank, would have more mobile branches. These are cost effective and a positive way of making sure banking is truly inclusive. Strange as it may sound, the old ways of doing things are now relevant again. Across the Limpopo, FNB in 2016 introduced the mobile banking units and these are shipping containers which were transformed to become fully functional bank branches, with infrastructure such as an ATM and a deposit taking capability. This reminds me of those lorry buses that we used as internet cafes in the ghetto.
In the national financial inclusion strategy document the Reserve bank of Zimbabwe supports the agent banking model. The apex bank recognises that agent banking and digital banking are efficient, convenient and cost-effective delivery channels for financial products and services.
I’m hoping 2017 is the year of the agent banks, mobile branches as well as bank integrations to take advantage of the existing mobile money agents.
Agent banking is the delivery of banking services by third-party agencies to customers on behalf of a licensed, prudentially regulated financial institution, such as a building society, commercial bank or any other deposit-taking microfinance institution. The third parties, non-bank agent’s institutions, may include: supermarkets, other retail outlets, post offices, pharmacies, butcheries, general dealer stores and lottery outlets.
The agent banking model has been very successful in some countries in Latin America. Closer to home, Equity Bank transformed itself from a struggling building society to a successful commercial bank in Kenya at a time when most banks were closing their branches. A key factor to Equity Bank’s success was in reaching the mass market for deposits with its pioneering and expertise in agency banking.
We do not need to reinvent the wheel. In order to promote a culture of savings in this country, we need agent bankers who can provide a wide variety of banking services to the bottom of the pyramid. The small-scale enterprises and the “villageprenuers” need a bank where they can access productive loans to expand their businesses. There is no better option than agency banking. Spare a thought for the village welder, the potter in Macheke, banana farmer in Chimanimani and Honde valley. Spare a thought for the small-scale miner and dress maker.
The power of agency banking is massive and it helps reduce financial and economic exclusion.
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