Financial Inclusion in Zimbabwe
Financial Inclusion means that individuals and businesses have access to useful and affordable financial products and services that meet their needs – transactions, payments, savings, credit and insurance – delivered in a responsible and sustainable way.[1]
Background
Financial Inclusion is a key enabler to the achievement of the Sustainable Development Goals (SDGs) which are a universal call to action to end poverty, protect the planet and ensure that all people enjoy peace and prosperity by 2030. The Reserve Bank of Zimbabwe has adopted a developmental approach to drive financial inclusion in Zimbabwe.
The following are some of the benefits of financial inclusion:
- freedom from clutches of informal lenders/loan sharks;
- enhances financial deepening;
- promotes inclusive and equitable economic growth;
- boost employment opportunities;
- promotes formalisation of the economy;
- promote growth of formal sources of credit;
- poverty reduction; and
- enhances financial stability.
Financial Inclusion in Zimbabwe
Financial inclusion is an important and contemporary aspect the world over. In Zimbabwe, many people are excluded from the financial sector and this has created high levels of poverty and inequality in the country. Financial exclusion comes in different forms and it is responsible for poverty and inequality in Zimbabwe. Most of the ‘unbanked’ dwell in the rural areas hence the need for developing the rural banking sector for local resource mobilisation and business development.
The majority(about 65%) of the people dwell in the rural areas. The rural dwellers are excluded from the financial mainstream and do not have good access to financial resources. Consequently, they remain on the lowest rung of the development ladder. The development of rural banks has potential to develop rural businesses that are currently underdeveloped partly because of lack of financial resources. Financial inclusion will promote local savings and investments thus developing rural businesses.
Implementation of Financial Inclusion Strategy in Zimbabwe
When Zimbabwe’s financial inclusion strategy was launched to run from 2016-2020 analysts said that it was to be best implemented if it was in sync with an informal sector strategy, according to University of Zimbabwe (UZ) economics Professor Ashok Chakravarti. The monetary authorities were targeting to increase access to banking services from an estimated 30 percent in 2016 to 90 percent of the population by 2020.
Reserve Bank of Zimbabwe (RBZ) launched the National Financial Inclusion Strategy in 2016 which targeted mainly the rural population, smallholder farmers, micro and small-to-medium enterprises, women and youth. These groups account for the bulk of the economically active population.
The National Financial Inclusion Strategy, on the whole aimed to increase access to banking, micro-finance, insurance and capital markets and was anchored on financial innovation, financial literacy, consumer protection and microfinance. Macroeconomic and Financial Management Institute of Eastern and Southern Africa (MEFMI) executive director Dr Caleb Fundanga, said in order for financial inclusion to be entrenched within the SMEs sector, traditional banks needed to leverage on mobile money.[2]
Role of Deposit protection in promoting financial inclusion
Financial inclusion is the delivery of financial services at affordable costs to sections of disadvantaged and low-income segments of society. In Zimbabwe, the Deposit Protection Corporation (DPC) is part to the National Financial Inclusion Forum crafting a new National Financial Inclusion Strategy. DPC is a member of the thematic committee on consumer protection and people living with disabilities. The Forum focuses on the legal, institutional and operational infrastructure to advance inclusion.
Financial exclusion plays a key part in the creation and amplification of poverty via limitation of the extent to which the poor and/or marginalised communities access financial services. Broadly, a person is considered financially excluded when he/she is not able to access some or all the services offered by mainstream financial institutions in his/her country of residence due to problems associated with access, conditions, prices, marketing or self-exclusion.
Accordingly, regulators and governments in most countries are addressing this problem through new channels and technology, including microfinance institutions, branchless banking and electronic money. Through these and other developments, an increasing number of small depositors and low-income earners are gaining access to financial services in emerging economies. Financial inclusion is critical to Zimbabwe’s Interim Poverty Reduction Strategy and attainment of Sustainable Development Goals.
Protecting the Majority of Depositors
The DPC provides assurance or a guarantee to depositors that they will receive their deposits in part or in full in the event of a bank failure. Operationally, this means that depositors with deposits less than the coverage limit (currently $10 000 for conventional banks and $500 for deposit taking microfinance institutions) will be paid in full.
Building Confidence in Financial Institutions
The DPC promotes financial inclusion by fostering confidence in financial institutions and potentially leading to greater savings among the poor provided that they are informed about safe places to store their money.
The DPC provides peace of mind and security to depositors in knowing that their deposits will be reimbursed in the event that their contributory institution becomes illiquid or insolvent. The existence of an explicit deposit protection scheme under DPC reduces financial uncertainty, thereby building confidence in the financial system, and enhancing financial intermediation on a nationwide basis, thereby promoting financial inclusion.[3]
Further Reading
https://www.pindula.co.zw/images/c/c6/National_Financial_Inclusion_Strategy.pdf
