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Charles Dhewa

Contrary to the approach introduced by financial institutions this tobacco marketing season, financial inclusion is not just about encouraging farmers and traders to open bank accounts. It should be more about facilitating business transactions between farmers and other value chain actors. Opening a bank account should be necessitated by an underlying inclusive process. Banks should first invest in thorough evidence gathering such as identifying clusters along the value chain.

For example, they should identify and properly characterise agriculture markets; food processing SMEs supported by agriculture markets; farming areas like irrigation schemes and input suppliers. Such baseline evidence should inform a financial inclusion system that links producers, processors and markets. It is important to avoid short cuts on this important issue.

Sakubva market as an example

In the interest of financial inclusion, banks should find out which processors are supplied by Sakubva market? Which farming communities or irrigation schemes supply Sakubva market? Answering such questions will enable banks to provide financial support in line with all the nodes along the value chain.

For instance, if a farmer wants to be paid before supplying to particular traders in the market, an internal transfer is made to his account. Same with input suppliers who can supply inputs and an internal transfer is done. The facility can be integrated with banks’ mobile money transfer mechanisms.

Most value chain actors are now very conscious of the opportunity cost of keeping money in the bank in terms of time spent doing the transaction, walking to the bank and standing in long queues. A bank’s mobile money system should simplify transactions and save time. When the system is set up, instead of introducing high monthly charges, banks can introduce minimal charges on transaction processes along the value chain.

Financial inclusion is about facilitating business transactions between farmers and other value chain actors

This means they maximise on the velocity of transactions, for example, charging 1c per transaction can guarantee $10 from 1 000 transactions. In a market like Mbare or Sakubva, a trader can handle at least 500 transactions a day which can generate $5 per day for the bank. This is a more sensible model instead of a bank deducting $20 per month from an account for money not being used.

This will make financial inclusion more cost-effective. It does not make sense to introduce financial inclusion in one cluster such as tobacco without identifying related clusters. Thorough research and baseline mapping is required before introducing financial inclusion. Otherwise it will remain well articulated on paper. Most business models banks are holding onto are on the verge of extinction.

Corridors and clusters approach to financial inclusion

A corridor can comprise agriculture, metal fabrication, transportation, equipment manufacturing and inputs provision. Such a broad network makes financial inclusion feasible. If you open a bank account in Harare you should be able to interact with farmers in Mutoko, Muzarabani, Guruve, Macheke, Nkayi, Chipinge and other areas. It does not make sense to deposit a tobacco farmer’s money in a bank at an auction floor when such a bank does not have a branch or relationships where the farmer comes from.

Instead, when a farmer from Hurungwe’s money is deposited in a bank at Boka auction floor, s/he should be linked with other service providers such as agro-dealers or super markets from his home area so that a transaction can simply be made from his bank account to those organisation from whom he wants a service. In fact, the farmer wouldn’t wait for the money to show up in his/her account but can check the balance in Chinhoyi or Karoi on his/her way home.

Mealies

At the moment it looks like banks are only interested in bank charges because each farmer just waits to withdraw his/her money and use it the same way s/he could have done had s/he been paid directly by the auction floor system. The difference is that this time the farmer loses time while waiting for the bank to get money where charges are deducted, with the farmer receiving less money.

Banks with branches at tobacco auction floors are not linked with agro-dealers and other actors from whom the farmer may require services who can receive money from the farmers’ bank account online. In addition, the banks do not seem to have information about what else the farmer can buy and from whom, where? Without such information, financial inclusion remains an incomplete process.

The agency banking model can be more effective if properly contextualised. However, agency banking should also not just be for withdrawing and depositing money but facilitating transactions. An agent in Mbare should be linked with the one in Masvingo so that traders can make transactions through the agents, with commodities supplied from Mbare to Masvingo. At the moment, a trader from Masvingo coming to buy commodities in Mbare, Harare has to withdraw cash from his/her bank where he is charged before buying commodities in Mbare.

The importance of piloting across business corridors and clusters

Banks should not pilot financial inclusion in one place but along the whole corridor — business clusters from Harare to Mutoko, for instance. Some food chain stores are offering agent banking services but such services are not found at growth points and rural service centres.

Someone in Harare keen to buy commodities for his parents in Chivi should just make the payment in OK Harare and the mother goes to pick them at a local supermarket, not necessarily OK in Chivi. At the moment one has to actually send money rather than just facilitate the movement of commodities. Banks should link seed companies with supermarkets, agro-dealers and general dealers if financial inclusion is to be meaningful for rural dwellers. If everything is done in Harare and other big cities, that is not financial inclusion.

If financial institutions are interested in conducting informative research on this important issue, buyers such as agro-dealers and suppliers can be key informants. An agro-dealer can tell you potential clients and areas where they come from as well as their capacity to buy particular commodities in a given period. That information helps in mapping service pathways and demand zones.

Financial institutions can then target the buyers’ clients. Unfortunately, there is too much individualism in our banking sector. That is why Zimswitch is no longer effective as some bank cards are rejected. On the mobile phone, most banks are now providing bank balances. Why can’t that service be extended to transacting so that one can actually purchase goods over the phone rather than just seeing that a deposit has been made?

Riding on concentration among business communities of practice

Most SMEs activities in Zimbabwe are concentrated in one place where the volume of their transactions is very high. Banks can take advantage of this concentration to create a financial inclusion system that consolidates transactions within each vibrant community of practice. The savings component should not just be about keeping a certain amount of money in a bank per given period.

Due to the fluid nature of money, $20 can be moved in and out of the system several times. The bank will make more money through the velocity of transaction rather than locking money in a safe. The same $20 can benefit more people. Rather than parking $20 in a safe, a trader can generate an extra $5 and its better for the bank to get 50c per transaction per day or in two days.

Failure to tap into the

full force of technology

It seems financial institutions have failed to ride on information technologies such as WhatsApp. If a group of people can exchange a lot of information on WhatsApp, why can’t we have the same principle mimicked for financial transactions in a community of practice? The same question can go to fuel service stations. Why should each time someone buys fuel, s/he has to produce cash? While banks have policies stipulating a limit beyond which cash should be used, they are not implementing the policies to the letter.

Bank transfers are prohibitively expensive. Rather than be charged $10 for transferring money from one bank to the other, people are resorting to withdrawing the money and handing over cash to someone who could have received it through bank transfer. High charges are transferring the burden to clients. Why should clients be punished for banks’ poor relationships with each other? This takes us back to eMKambo’s original argument that financing production should be based on a thorough understanding of the market and whether other actors such as buyers have capital. You can’t do proper market linkages without fully understanding the whole system including buyers. A big challenge is the copycat syndrome in the banking sector where banks are busy imitating each other rather than innovating.

Charles Dhewa is a proactive knowledge management specialist and chief executive officer of Knowledge Transfer Africa (Pvt) (www.knowledgetransafrica.com) whose flagship eMKambo (www.emkambo.co.zw) has a presence in more than 20 agricultural markets in Zimbabwe. He can be contacted on: [email protected] ; Mobile: +263 774 430 309 / 772 137 717/ 712 737 430.