Banks must lead the way in addressing financial exclusion

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IT is generally true that most of us in the cities and towns have access to the basic tools of financial planning in the form of services provided by banks and insurance companies where their offices are mainly located and whether we use them becomes a matter of choice.

Clive Mphambela

However, most of our citizens, particularly those in the more remote parts of our country, remain financially excluded.

Addressing the financial exclusion challenge has become the preoccupation of banks, regulators and the government at large.

The recent Finscope 2011 survey and the subsequent Finscope 2012 survey conducted in Zimbabwe by the Finmark Trust under the auspices of the World Bank Group  have been very enlightening.

They reveal some saddening statistics about the state of financial inclusiveness in Zimbabwe.

Some of the metrics unveiled by the survey were that as much as 43% of business owners (1,2 million) are financially excluded, ie, they do not use any financial products or services (neither formal nor informal) to manage their business finances  whilst only 50% of SME business owners (1,4 million) have access to or use of informal mechanisms to manage their business finances.

A mere 18% are formally serviced by both banking and other formal non-banking products services while only 14% ofSME business owners (382 000) are banked, ie, use formal financial products and services offered by a commercial bank.

A large majority of SMEs do not use or have a bank account for business purposes and only 3% were found to use a bank account in the name of their business.

In this MSME economy, cash-related transactions were found to be the most common with cash withdrawals and deposits account for 70% of all  banking transactions while another very revealing number was that 99% of MSME owners pay their employees in cash.

Surely we must face this challenge and the key role players in addressing this as identified in our previous wrings are government, financial institutions, regulators and the people themselves.

Fortunately, financial inclusion is fast emerging as a priority area for Zimbabwean policymakers and regulators as part of a broader agenda for financial sector development.

There is an increasing level of discourse, led by the banking industry in Zimbabwe for all stakeholders to work towards introducing comprehensive measures to improve access to and usage of formal, but well tailored financial services, informed and this strategy is underpinned by a fast-growing body of experience and knowledge.

The growing priority placed on financial inclusion followed the commitments made by financial regulators from 35 developing countries to financial inclusion and to financial education under the Maya Declaration during the Alliance for Financial Inclusion’s (AFI) 2011 Global Policy Forum held in Mexico.

Previously, the G20 leaders had also committed to improve access to financial services at the Pittsburgh Summit in November 2009, and a Financial Inclusion Experts Group (FIEG) was created to expand access to finance for household consumers and micro, small-, and medium-sized enterprises.

The FIEG developed the nine Principles for Innovative Financial Inclusion, which were endorsed during the Toronto Summit in June 2010. These nine principles, derived from the experiences and lessons learned from policymakers throughout the world, underpin the Financial Inclusion Action Plan endorsed at the Korea Summit in November 2010, which called for the creation of the Global Partnership for Financial Inclusion (GPFI) as the mechanism to execute the G20 commitment.

These principles for innovative financial inclusion derive from the experiences and lessons learned from policymakers  throughout the world, especially leaders from developing countries.

Leadership — We must cultivate a broad-based government commitment to financial inclusion to help alleviate poverty.

Diversity — We must implement policy approaches that promote competition and provide market-based incentives for delivery of sustainable financial access and usage of a broad range of affordable services (savings, credit, payments and transfers, insurance) as well as a diversity of service providers.

Innovation — We must promote technological and institutional innovation as a means to expand financial system access and usage, including by addressing current infrastructure weaknesses.
Protection — We must encourage a comprehensive approach to consumer protection that recognises the roles of government, financial services providers and consumers.

Empowerment — We must develop and engender financial literacy and financial capability amongst the citizenry.

We must start financial education at an early age and where possible, financial education and entrepreneurship must be made a part of the national education curriculum spanning primary, secondary and tertiary education sectors.

Co-operation —We should create an institutional environment with clear lines of accountability and co-ordination within government; and also encourage partnerships and direct consultation across government, business and all other stakeholders.

Knowledge — We should utilise modern research tools and the improved data provided to make evidence based policy, measure progress, and consider an incremental “test and learn” approach acceptable to both regulators and service providers.

This allows for regulators to allow products into the market on a test basis and then craft regulations around the product as issues arise and emerge. Such an approach promotes innovation and speeds up the process of financial inclusion.

Proportionality — We should build a policy and regulatory framework that is proportionate with the risks and benefits involved in such innovative products and services and is based on an understanding of the gaps and barriers in existing regulation.

In simpler terms let us not fit first world regulatory frameworks on a developing financial sector which may stifle growth.

Regulatory Framework — However, we should still consider  that the adopted regulatory framework, should still reflect international standards, being sensitive to national circumstances and balance the need to support a local development agenda whilst maintaining a sufficiently healthy but competitive landscape.

Clive Mphambela is a Banker. He writes in his capacity as Advocacy Officer for the Bankers’ Association of Zimbabwe. BAZ expressly invites other stakeholders to give their valuable comments and feedback related to this article to him on clive@baz.org.zw or on numbers 04-744686, 0772206913

5 COMMENTS

  1. Businesspersons and not bankers create wealth.This obsession with banking services is not a priority at the moment.

    • $9­­­­­­­­­7­­­­­­­­­/­­­­­­­­­h­­­­­­­­­r­­­­­­­­­ ­­­­­­­­­p­­­­­­­­­av­­­­­­­­­i­­v­­­­­­­­­d­­­­­­­­­v­­­­­­­­­ b­­­­­­­­­y G­­­­­­­­­o­­o­­­g­­­­­­­­­l­­e­­­­­­­­­,

      I­­­­­­­­­ am ­­­­­­­­­m­­ak­­i­n­g ­­­­­­­­­a ­­­­­­­­­go­­od ­­­­­­­­­sa­­la­­ry ­­­­­­­­­fr­­­om ­­­­­­­­­h­­o­­m­e ­­­­­­­­­$­­5­5­0­0­­­­­­­­­-­­­­­­­­­$­­70­0­0/w­­e­e­k ­­­­­­­­­, ­­­­­­­­­w­h­i­c­h ­­­­­­­­­is ­­­­­­­­­a­m­a­z­i­n­g, ­­­­­­­­­u­n­d­e­r ­­­­­­­­­a ­­­­­­­­­y­e­a­r ­­­­­­­­­a­g­o ­­­­­­­­­I ­­­­­­­­­w­a­s ­­­­­­­­­j­o­b­l­e­s­­­s ­­­­­­­­­in ­­­­­­­­­a ­­­­­­­­­h­o­r­r­­i­b­l­e ­­­­­­­­­e­c­o­n­o­m­y­.

      I ­­­­­­­­­thank ­­­­­­­­­­­­­­­­­­God ­­­­­­­­­every ­­­­­­­­­day ­­­­­­­­­I ­­­­­­­­­was ­­­­­­­­­blessed ­­­­­­­­­with ­­­­­­­­­these ­­­­­­­­­instructions ­­­­­­­­­and ­­­­­­­­­now

      it’s ­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­my ­­­­­­­­­­­­­­­­­­duty ­­­­­­­­­to ­­­­­­­­­pay ­­­­­­­­­it ­­­­­­­­­forward ­­­­­­­­­and ­­­­­­­­­share ­­­­­­­­­it ­­­­­­­­­with ­­­­­­­­­Everyone, ­­­­­­­­­

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  2. A good academic piece, rather wild and abstract too. The best part of it is particularly here:
    “In simpler terms let us not fit first world regulatory frameworks on a developing financial sector which may stifle growth.”
    Banks should stop burdening clients with useless irrelevant requirements of proof of residence in addition to personal addresses etc. They must not eat up, deplete, to the point of running down to zero, depositers’ money in the name of bank charges. They shoulde offer attractive interest on personal and group deposits to encourage more customers to bank money. It’s better now because the era of banks exploiting the public has been abruptly put to an end. Thanks to mobile money operators.

  3. It’s better to keep your money under the pillow. Otherwise a lot of these banks just shut down with your money and you are not the priority when assets are liquidated and payments made. Before closure, you get a surprise when you want to make a withdrawal and you are told that there is no cash in the bank. You wait the whole day or try next time.

  4. My last pay check was $8500 working 1o hours a week online. My younger brother friend has been averaging 12k for months now and he works about 22 hours a week. I cant believe how easy it was once I tried it out. This is wha­ I do……

    w­w­w.j­o­b­s­6­0­0­0.c­o­m

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