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Tapiwa Maswera Correspondent

Zimbabwe must develop a strong and vibrant financial services industry. The financial services industry is the core of the economy — and it is the most critical industry when it comes to the growth and development of any society.

No country can develop a sophisticated economy without a sound, viable and efficient financial services industry. Zimbabwe’s financial services industry must develop products and services that serve the informal sector.

Zimbabwe’s economy is becoming increasingly informal because financial products and services are increasingly failing to address the needs of the common man. To develop, the financial sector must look to financial inclusion.

Meeting the needs of customers

Financial inclusion is defined as the availability and equality of opportunities to access financial services. The financial services industry must meet the specific needs of users without discrimination. 

Individuals and businesses should have access to useful and affordable financial products and services that meet their needs. These products and services must be delivered in a responsible and sustainable way.

Financial inclusion must be based on creating access to credit for the less fortunate in society, making it possible for people to save and put away something for the rainy day and allow access to insurance products and services that allow them to manage risk.

Credibility challenge

One of the key objectives of financial inclusion is to get the unbanked and underbanked to have access to financial services. Most people in Zimbabwe still lack access to sustainable financial services, whether it is savings, credit or insurance.

As a country, we face great challenges. Our financial services industry has lost credibility among the people that it is supposed to serve. We must address the constraints that exclude people from full participation in the financial sector.

Checking the country’s heartbeat

The financial system can be likened to blood circulatory system in a human being. If a human being has to stay alive, blood must deliver nutrients to all parts of the body. Delivery of nutrients to different parts of the body must be sustainable, repeating and regular.

There is an optimal blood pressure that the body requires, for this to function properly. It can be helpful to think of the optimal blood pressure in terms of the pressure in a car tyre.

When tyre pressure is too high, there is a risk that the tyre will burst. Tyre pressure cannot be too low either, because the system would then fail. This blood system is critical to the continuation of life itself.

This is why a stethoscope is the universal symbol of the medical doctor. The heartbeat is the first thing that the doctor checks. Money facilitates the exchange of value throughout the economy between individuals and businesses.

The financial system is therefore the life blood of the economy. Optimal functioning of the economy depends on the soundness of the financial system.

The doctrine of private enterprise

Why do businesses exist at all? The great economist Milton Friedman says the sole reason why a business exists is to maximise profits for the shareholders.

Company executives are employees of the shareholders. And therefore their one and only duty is to serve the interests of shareholders. Serving the interests of shareholders can only be done by maximising profits.

No business can be sustainable without making profits. No society can grow sustainably without adequately compensating and rewarding those who take the risk of advancing and developing it. Charity is not scalable.

The customer is the king — long live the king

So how does a business maximise profits? A business can only maximise profits by finding increasing numbers of customers who are able and willing to buy its products at a profit. It can only increase its profitability by increasing its reputation and brand so that it can sell more products more profitably.

The customer is the ultimate pay master. A business can exist without shareholders but no business can exist without customers. It is that simple.

The corruption of the financial services sector

The financial services sector is a very special part of the economy. It is like a post office. Money is their raw material, product and service. Their job is to move money around the economy — not to intercept the parcels that they are moving on behalf of customers.

In 2009, a well-known notorious robber happened upon our realm. We all know who he is and where he comes from. Hyperinflation ravaged and ransacked all money markets and fixed assets. It decimated profits in the financial services sector.

But the property and equity assets, the robber did not touch at all. How did our financial sector react to this catastrophe? They intercepted the customer’s parcel. There was some money still left in there. Instead of delivering it to the customer, they helped themselves.

A body blow to the financial services industry

It is trite that hyperinflation was a terrible blow to the financial services industry. Was this justification for them to intercept the customer’s parcel? The commission of inquiry that was appointed to investigate the matter thought otherwise. Whatever the merits of either case, what we cannot run away from is its ugly outcome. Zimbabwe now sits with a financial sector that is incapable of facilitating payments.

Confidence in the industry is non-existent, to say the least. The saving rate is negative. And a whole generation of pensioners and policyholders, the prudent and most responsible part of our society, was condemned to poverty and squalor.

Reviving the economy

There are many opinions on how this economy can be revived. Some have suggested that we need foreign investment. Others have opined that we look forward and forget the wrongs of the past.

What has never been acknowledged, which is in need of very urgent acknowledgement is that our financial services sector is no longer financially sound. It is bad enough that its foundation was built to serve the white population of this country and our former colonial masters.

Given these limitations, the initial optimism of independence gave way to the ugly reality of an expanding funnel of social expectations. The collapse of the entire financial edifice was inevitable. We delude ourselves, when we think we can simply pick up the pieces and continue as if its business as usual.

In medical parlance, our financial system needs major corrective surgery and an overhaul. And then recuperation and recovery.

Conclusion

“Give me control of a nation’s money and I care not who writes the laws”, the founder of the Rothschild dynasty is reputed to have said. It’s an adage that Zimbabwe is best advised to heed.

After all Rothschild gave Cecil Rhodes the money he needed to colonise this country. An action that was only reversed at great cost. It is a measure of our financial naivety at independence that we thought Rhodesia’s exclusive financial edifice, which Rhodes deliberately designed to exclude the majority of the population could accommodate the expanding social expectations of a people freed.

Financial inclusion is not just about access to financial products and services.  It is also about power, and financial rights.  The power that the money system wields is the essential core of the financial services industry.

And it must serve all the people, starting with the most vulnerable,  like pensioners and policyholders. After all, they are the most responsible members of our society.

Tapiwa Maswera is an actuary and founder of Global Worldview, a company dedicated to the development of world class financial leadership. He can be contacted on [email protected]