Let’s Bank Them Matsvimbo Dida
The issues of microfinance crept into Zimbabwe like a leopard, were talked about as far back as the year 2006, and the ‘leopard’ disappeared before marking a mark. One wonders whether there were no known benefits of financial inclusion in the financial sector or whether the initiatives lacked some kind of support. In Zimbabwe, like any other African country, issues of income disparities and the widening gap between the poor and the rich continues to push the poor deeper into poverty. On the contrary, there are far fewer rich people than the poor. This means that the average standards of living in a country are weighed down by those lived by the majority poor. Every country should strive to ensure that the poor co-exist with the non-poor. If a country has a large proportion of its population being poor, that slows down economic growth. National social security issues become a major concern and feminine and diseases falling on an impoverished nation would be difficult to control. There is every reason to ensure that the poor are equipped with capabilities to improve their livelihoods.
But what is financial inclusion
Financial inclusion is delivery of formal financial services at affordable cost to the vast sections of disadvantaged and low-income groups. It requires that formal financial services are not only available but are accessible and affordable to all groups of people in the society. The issue of affordability brings up the critical issues in Zimbabwe which affects usage of some of the products deemed to be financial inclusion products. There is no use launching a product targeting a certain group of society which that segment fails to access.
For financial inclusion to be successful, there should be access to and usage of a range of quality, timely, convenient and informed financial services at affordable prices. These services should be under appropriate regulation that guarantee consumer protection and promote financial education to improve financial capabilities and rational decision-making by all segments of the population.
Are the poor keen to be ‘included?’
Contrary to some beliefs in the banking sector, the poor people want to save, can save, and they do save money. The poor are clear of the need to save money and to serve themselves from economic shocks. Where given appropriate saving vehicles, the poor do save. In light of the ubiquity of informal and semi-formal services, people who have no financial services are very rare but the majority use services which are risky, inconvenient, costly and at times harmful. The poor are keen to be financially included but the financial systems themselves shuts them out. In financial inclusion terms, poor people are those who are in some state of economic deprivation inhibiting them at times from having or accessing some basic needs and wants as and when they want them. These could be food, medical, accommodation, school fees and so on. Poverty also results in the lack of access to the instruments and means through which the poor would improve their lives. In financial inclusion terms, the latter are referred to as capabilities.
Money is equally important to those who have it and to those who do not have it. Providing inclusive financial services to all groups of societies is the cornerstone for inclusive financial development. Nevertheless, financial institutions such as banks prefer those who have plenty of it. Researches have highlighted that while the poor would urgently need financial services, financial institutions would rather close branches in poor areas or not even establish one.
What is in it for the poor
The first benefactor of financial inclusion are the poor themselves and those living in remote areas of the country than the non-poor. The availability of financial products like savings products, health products, microinsurance and credit products to the poor, builds a base for capabilities which are much required by the poor and disadvantaged groups in the society. It is the capabilities which help the poor go on with their small business and grow the to the extent of tackling more and higher ticket businesses. The theory of poverty cycle dictates that low capabilities result in low income which in turn results in low demand for goods and services. The low demand for goods and services results in low labour productivity and the vicious cycle continues. It requires the efforts and commitment of the financial industry and the authorities to break the vicious poverty cycle which debilitates against economic development. Some poor people have fallen into absolute poverty due to failure to weather some economic and health shocks like illness of a child or bread-winner or a death in the family. Such could be avoided if financial products like microinsurance or credit were accessible to this market.
Researches have proved that savings deposits accumulate faster if financial products are used, be it formal, quasi-formal or informal. This is because it is naturally difficult to save money while holding it in one’s hand.
If savings are put away where they do not mix with daily cash, there are greater chances of savings accumulation. This is why informal savings clubs, burial societies etc, are managing to capture significant savings deposits where financial institutions are either not represented or do not have appropriate quality products for the market segment.
In Zimbabwe, banking and non-banking financial services are centered in towns and cities. The poor in the rural and remote areas are staved of these facilities. The population demography of Zimbabwe is that 70 percent of Zimbabweans live in the rural areas while 30 percent is in towns and cities. Quite clearly, if Zimbabwe has to improve on inclusive development, there is no way it could do without 70 percent of its population.
Financial institutions have inbuilt capabilities within their structures to manage credit facilities and pool resources for the benefit of the larger societies. Considering that development of the poor tend to be curtailed by slow growing savings, they would benefit more from pooled resources if financial institutions practice financial inclusion for inclusive development.
Please note that this article was written in private capacity of the writer and the views have nothing to do with any institution which the writer may be associated with. [email protected]