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Patrick Chinamasa Correspondent
Financial inclusion has assumed not only a regional dimension, but a global dimension, as exemplified, in no small measure, by the structure of the hosting of this conference as well as the diversity and inclusivity of the participation, which includes the SADC Secretariat, the EU, the United Nations Capital Development Fund (UNCDF), FinMark Trust, the SADC Bankers Association, Departments of Governments of SADC Member States, central banks and banking institutions in the SADC Member States, as well as industry and other private sector participants from the entire SADC region.

For the benefit of the young and not so young among us, let me recount the development of the concept of financial inclusion within SADC. Indeed, while researching on the subject of financial inclusion to prepare for this indaba, I found myself tracing it back to the very foundation of SADC.

At its foundation in 1980, the then Southern Africa Development Coordination Conference (SADCC) sought ways of coordinating the development of independent states that constituted its membership in order to reduce their dependence on the then apartheid South Africa.

The idea was to achieve inclusive growth based on the African family concept of assisting our brothers and sister to uplift themselves. This is part of the spirit of ubuntu.

In a typical African country when member of a family three rises economically, so to speak, he has an obligation to assist his brother or sister to also rise because as long as at least one member was still poor the whole family was considered poor as this created the recipe for internecine conflicts that started as real and imagined witchcraft and often escalated into family and tribal wars.

The disparities among the SADCC members became apparent with the end of apartheid and the re-entry of South Africa into the family. The wide differences in development between South Africa and its siblings, on the one hand, and within the various demographic groups within South Africa itself, brought to the fore the need for accelerating the pace of economic integration and growth while enhancing inclusivity within the individual member state.

With realisation the Member States decided to transform the SADCC into a community, i.e., the Southern Africa Development Community, as we know it today. Thus SADC is a development community and not just a development coordination conference.

With time the idea of inclusive economic growth translated into the Regional Financial Integration Programme (FIP).

However, in the context of developing the financial integration of the SADC Member States, it became clear that we could not achieve our goals unless three things happened i.e. a) placing the objective of financial integration within the context of integrated economic growth; b) promoting peace within the Member States to ensure the creation of an investment enabling environment in the SADC region and within each member state; and c) ensuring that there was inclusivity and empowerment within each member state through the participation and involvement of all individuals and businesses in a member state in that country’s financial and economic system.

There had to be harmony between the goal of financial integration and the overall goal of economic growth. We had to ensure that the financial integration that we were seeking had to be founded in the economic growth that we were seeking.

Our economies had to be integrated in order to achieve the economic growth. In other words, we had to focus more on complementing each other, rather than competing with each other. This meant taking stock of our individual comparative advantages and seeking ways of enhancing growth in these by promoting intra-regional trade and investment.

Some of the fruits of these efforts today are witnessed in the rise in intra-regional trade from US$91 billion in 2000 to US$354 billion by 2011. The pursuit of this goal gave rise to the Finance and Investment Protocol (FIP) in 2012.

Through the adoption of the Finance and Investment Protocol (FIP), the SADC region acknowledged the importance of working together to promote regional financial integration and financial market development to connect financially the previously disconnected countries.

This is intended to make it quicker and easier for capital to move across jurisdictions and for economic entities to transact across borders. Already measures such as the development of the SADC Integrated Regional Electronic Settlement System (SIRESS) funds transfer mechanisms are operational and moving volumes.

FIP is part of the overall Regional Economic Integration Programme and is receiving support from the EU under the SADC Regional Economic Integration Support (REIS) programme.

The SADC Regional Economic Integration Support (REIS) programme encompasses the attraction and promotion of local and foreign direct investment (FDI) through the improved harmonisation of the investment climate in each of the Member States.

Promoting peace within the member-states

In the pursuit of regional economic integration, it became clear that unless there was peace in any part of the region all our efforts at attracting investment and pursuing economic growth were an exercise in futility. This gave rise to the establishment of the SADC Organ on Defence, Security and Peace, which is working exceptionally hard and is achieving successes in bringing about peace, which is the first and most important ingredient in economic growth.

The third aspect is that of inclusivity which relates to participation in the economic affairs of their country. It is from this that the concept of financial inclusion derives.

Economic growth does and must serve a purpose, i.e., the betterment of the livelihoods of the people. Without tangible benefits in the livelihoods of the people, no amount of GDP growth or investment will be of value to the people.

It is this need for empowerment that has led virtually every SADC Member State to develop a policy for the empowerment of its citizens. In Botswana for example, this has been done in the context of the Citizens Economic Empowerment Act.

Similarly, Zambia has the Citizens Empowerment Act (2006). In Zimbabwe, we have the Indigenisation and Economic Empowerment Act (2007), which has been misunderstood both at home and outside as seeking to disempower the haves, yet it seeks to ensure, in the spirit of ubuntu, that we assist the weaker and poorer members of our society to develop and together to develop and enjoy the fruit of economic growth.

It was while we were grappling with the strategies of achieving economic growth and empowerment that through the efforts of development advisers such as FinMark Trust that our eyes were opened. For indeed, financial inclusion goes to the heart of economic empowerment and the pursuit of livelihood enhancement.

It was almost with hindsight that we in the leadership of the region, realised that we can achieve our economic integration goals through enhancing the level of financial inclusion in each of our Member States.

Thus, at the August 2015 meeting in Gaborone, Botswana, the SADC Council of Ministers, realising that financial inclusion was increasingly being recognised as key to addressing poverty and inequality not only in the SADC region, but also within the global context, approved the Strategy on Financial Inclusion and SME access to finance in August 2016.

The strategy provides that FinScope Financial Inclusion surveys should be conducted in every Member State every three years. In addition, after every survey, a policy intervention has to be implemented to close any gaps in financial inclusion.

With the financial assistance of DFID, the World Bank and other financiers through FinMark Trust who provide the technical assistance, many FinScope Surveys have been and are still being conducted in all the SADC Member States. In addition, programmes to remedy the identified Financial Inclusion shortcomings have been adopted in many of the countries.

Such a programme in Zimbabwe is the Making Access-to-finance Possible (MAP) which we are aware is being funded by the UNCDF, through FinMark Trust.

To us in the leadership, Financial Inclusion represents a vehicle to facilitate the achievement of the economic growth and integration of the SADC Region, as well as the empowerment of its citizens while creating and establishing a favourable investment climate. It was this that led to it the Council of Ministers adopting the Strategy for Financial Inclusion and SME Access to Finance in August 2014.

Financial Inclusion in Economic Planning

Financial Inclusion is now proving to be a critical source of information for economic planning. Speaking for the Government of Zimbabwe — and I am sure many Governments in the Region have similar experiences — my Ministry and the Central Bank have been using the information derived from Financial Inclusion Surveys for economic and monetary policy planning since the benchmark FinScope Financial Consumer Survey or 2011 which established that the country had a 40 percent exclusion rate.

The intervention measures that we implemented saw the level of financial exclusion drop to 23 percent in 2014 when the Survey was repeated to check on progress. Similarly, the percentage of the population with bank accounts had increased from 24 percent to 30 percent.

However, the value of the surveys lies more in their identification of behavioural patterns that include the preferred channels of remitting funds, the sources of income, the level of trust that the public has in certain financial mechanisms (as evidenced by their behaviour).

Still on our experiences in Zimbabwe, when the benchmark FinScope MSME Survey was conducted in 2012, it shocked us. While we knew that the economic structure had changed, we were not prepared for the magnitude of the changes. For example, the Survey established that there were 2,8 million MSME entrepreneurs employing a further 2.9 million and generating business transaction worth $7 billion was an eye opener.

The magnitude of the MSME sector (the majority of which is informal) galvanised us into effective policy planning, leading me as Finance and Economic Development Minister, to coin the term “the New Normal” economy, which became the basis of economic planning. Our focus is on enhancing and formalising this new, real economy while not losing focus on the large corporate business-driven economy.

I have requested FinScope to assist us with the 2017 FinScope MSME Survey so that it can inform our successor economic plan to ZIM-ASSET, our current economic policy blueprint, whose planning horizon end in 2018.

So financial inclusion helps us to know our real economy and thus plan accordingly.

• This is an abridged version of a keynote presentation made by Finance Minister Honourable Patrick Chinamasa at the SADC Financial Inclusion Forum, Centurion, South Africa yesterday.