The Finscope 2011, 2012 and 2014 surveys conducted in Zimbabwe under the auspices of the Ministry of Finance were very illuminating on the state of financial inclusion or exclusion in the country. These important studies all revealed some interesting statistics about the state of financial inclusiveness in Zimbabwe. There is an increasing level of discourse, led by the Ministry of Finance and Reserve Bank of Zimbabwe (RBZ) and key stakeholders such as the banking industry in Zimbabwe, for all to work towards introducing comprehensive measures to improve access to and usage of formal, but well-tailored financial services.
by Clive Mphambela
It is now a generally accepted that access to basic tools of financial planning in the form of financial services provided by banks in large part and by myriad other non-bank financial institutions such as insurance companies, and microfinance institutions, to name a few, remains one of the key issues surrounding the prevailing low levels of financial inclusion in the country.
While most of the citizenry, particularly those in the more remote parts of the country, remain financially excluded at the access level, one of the big issues around the debate on financial inclusiveness has been identified as low financial knowledge or literacy, which many economists and development practitioners have also shown to be directly correlated to low levels of financial capability in most populations. In Zimbabwe’s case, relatively high costs as a proportion of low incomes have also been highlighted as key barriers to greater financial inclusion. Notwithstanding the well-documented challenges so far, there is an increasing policy drive to place financial inclusion on the national policy agenda.
Who should be the key drivers of the National Financial Inclusion Strategy? It is therefore not surprising that the RBZ, the government and the banking sector, together with a wide array of stakeholders in the broader financial sector, are all seized with the agenda of addressing the financial exclusion challenge in the country. These efforts should be co-ordinated under a unified financial inclusion policy framework that should necessarily be central to the creation of a national financial inclusion strategy.
Fortunately for us in Zimbabwe, while we have our own unique circumstances and needs, we find that we do not have to reinvent the wheel in most respects. While the Finscope surveys referred to above have given us a useful base on which we can build a national financial inclusion strategy, we should also learn and borrow from the experiences of more than 60 other countries that have initiated financial inclusion reforms in recent years.
For instance, there was a priority placed on financial inclusion following 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 in November 2009 at the Pittsburg Summit, the G20 leaders had also committed to improve access to financial services, and a Financial Inclusion Experts Group (FIEG) was created to expand access to finance for both household consumers and micro, small, and medium-sized enterprises (MSMEs).
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The FIEG developed the following nine Principles for Innovative Financial Inclusion, which were endorsed during the ensuing summit in Toronto in June 2010. These nine principles, derived from the experiences and lessons learned from policymakers throughout the world, underpinned 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 commitments.
The principles for innovative financial inclusion, which were derived from the experiences and lessons learned from policymakers throughout the world, and, importantly, from the leaders of developing countries, are summarized below:
- Leadership — Stakeholders must cultivate a broad-based government commitment to financial inclusion in the quest to alleviate poverty across the previously excluded classes.
- Diversity — Policy implementation approaches must 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 encourage the creation of a diversity of service providers.
- Innovation — Technological and institutional innovations must be encouraged as a means to expand financial system access and usage, including by addressing current infrastructure weaknesses to achieve cost and other efficiencies.
- Protection — A common ground must be found that delivers a comprehensive approach to consumer protection that recognises the roles and competing needs of government, financial services providers and consumers.
- Empowerment — The financial inclusion strategy must be underpinned by strong efforts to increase financial literacy and financial capability among the citizenry. Financial education must be imparted at an early age and where possible, financial education and entrepreneurship must be made part of the national education curriculum spanning pre-primary, 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 regulations. In simpler terms, we should try not to fit first world regulatory frameworks on a developing financial sector which may actually stifle its growth and development.
- Regulatory Framework — However, we should still consider that the adopted regulatory frameworks should still reflect international standards, while remaining sensitive to national circumstances and balancing the need to support the local development agenda and at the same time maintaining a sufficiently healthy, stable but competitive and financially inclusive financial landscape.
What are some of the potential hurdles to achieving greater financial inclusiveness? The above principles also provide a reflection of the conditions conducive to spurring innovation for financial inclusion while protecting consumers and safeguarding the overall integrity and stability of the financial system. They are, however, not a rigid set of requirements, but are designed to help guide stakeholders and policymakers during policy formulation, strategy implementation, product design and other levels of financial inclusion decision-making processes. They are flexible enough so they can be adapted to different country contexts including our own, now that driving financial inclusiveness is firmly on the Zimbabwean agenda.
In this regard, therefore, an appropriate, flexible, risk-based Anti-Money Laundering and Combating the Financing of Terrorism (AML/CFT) regime outlining: the conditions for the use of agents as customer interfaces; a clear regulatory regime for electronically-stored value (mobile money); and market-based incentives to achieve the long-term goal of broad inter-operability and interconnection between financial services players and mobile telephony players (infrastructure-sharing frameworks), is paramount.
It is only with a clear national financial inclusion strategy that Zimbabwe can successfully drive domestic savings growth, create a sustainable financial services sector, and secure the future stability of the economy.
l Clive Mphambela is a banker. He writes in his capacity as advocacy officer for the Bankers’ Association of Zimbabwe (BAZ). BAZ expressly invites other stakeholders to give their valuable comments and feedback related to this article to him on [email protected] or on numbers 04-744686, 0772206913
