Financial Inclusion Gains Global Prominence

Financial inclusion is now being considered as one of the main pillars of the global development agenda. Various global initiatives have been promulgated to promote financial inclusion and these include the Alliance for Financial Inclusion (AFI) and the Global Partnership for Financial Inclusion (GPFI). AFI is a global network of financial policymakers from developing and emerging countries working together to increase access to financial services for the poor. Thus, the AFI administers several financial inclusion programs including convening of Working Groups and the provision of grants to support financial inclusion programs.

On the other hand the Global Partnership for Financial Inclusion (GPFI) was established by the G20 group of countries in 2010 with a view of carrying forward work on financial inclusion, including implementation of the G20 Financial Inclusion Action Plan .The GPFI seeks to strengthen coordination and collaboration between various national, regional and international stakeholders, helping countries put into practice the G20 Principles for Innovative Financial Inclusion, strengthening data for measuring financial inclusion, and developing methodologies for countries wishing to set targets. The Global Partnership for Financial Inclusion (GPFI) has four Subgroups through which it seeks to implement its program of work and these focus on: Regulation and standard setting bodies, Micro Small to Medium Enterprise (MSMEs) financing, Financial Literacy and Consumer Protection and Markets and payment systems, whose overall goal is to advance utilization of payment systems.

The drive to promote financial inclusion has been influenced by the realisation that financial exclusion of certain segments of the population contributes to slower economic growth; widening income inequalities and underdevelopment. Broader access to financial services, without price or non-price barriers to their use and offered in a responsible manner, have been shown to benefit poor people and other disadvantaged groups.

Financial Inclusion in Zimbabwe
The 2014 Fin-Scope Survey on financial inclusion in Zimbabwe highlighted that financial inclusion increased to 77% in 2014 from 60% in 2011 and this was mainly driven by the growth of mobile financial services. The survey confirmed a general observation in most developing countries that most of the people in rural areas, who also experience deep and high incidence of poverty, are financially excluded.

The Reserve Bank of Zimbabwe launched the National Financial Inclusion Strategy (NFIS) on the 11th of March 2016. The NFIS seeks to address the broad barriers to financial inclusion as well as improving the level of access to financial services in the country through a coordinated approach. However, following global financial inclusion agenda the NFIS will evolve around four main pillars, namely financial innovation, financial capability, financial consumer protection and microfinance. The NFIS will focus on the following key priority areas: MSMEs rural financing options; financial inclusion strategies for women and youth, development of micro insurance and micro housing services and products.

The NFIS strategy aims at improving access to finance through building a sustainable and inclusive financial system that provides a broad range of financial products and services to all economic agents. The information communication technology revolution has led to development of digital financial services which are being delivered mainly through mobile phone networks and other electronic delivery channels. Digital financial services have reduced the physical barriers and redefined the concept of banking. The growing digital data collected through mobile phone services now provides the basis for innovative solutions designed to provide services to the previously unbanked as the levels of information asymmetry are reduced. The NFIS will also seek to develop an appropriate framework for the introduction of new financial products and mechanism for expanding financial inclusion.

Mobile phone networks have provided innovative mobile money services through their platforms. According to POTRAZ mobile money subscribers in Zimbabwe reached 7.3 million in the fourth quarter of 2015, handling transactions worth US$ 533.07 million. The growth of mobile financial services has had positive effects on a country’s development, by offering an alternative and efficient form of domestic remittances services.

Private Sector Initiatives to Promote Financial Inclusion
A number of financial inclusion initiatives are being rolled out by the private sector in Zimbabwe. These include Ok Zimbabwe Money Wave and TM Financial services both available in store in their branch networks. The Zimbabwe Postal Service (ZimPost) has been contracted by a number of financial institutions as their banking agents. The postal service has an estimated 250 post office outlets countrywide and is present in every administrative district of the country. Notable among agency banking relationship is between ZimPost and the People Own Savings Bank (POSB). Although most of these agents are conveniently located especially in the marginalised areas within reach of the marginalised communities they have their own setbacks in terms of service provision hence limit the extend of financial services that can be extended to the communities. Transactions that are handled by agencies are mainly limited to withdrawals, deposit taking and bill payments Agents do not handle applications loans/credit or funds transfer due to the principal agent agreement agreed upon by the bank and the agent. However, the main challenge of the financially excluded populations is access to credit to finance both on farm and off farm income generating activities.

Gap and Lessons Learnt
Financial inclusion strategies and products should satisfy three basic tenets for them to be effective .These are Access, Quality, Usage and impact of financial services and products. Whilst the country has, instituted a number of initiatives to broaden access to financial services, however gaps still exist in the level of access to, usage and quality of financial products and services.
Access to financial services and products

With at least 65% of the population being economically active in the informal sector, they are however still deprived of financial services (insurance, banking, payments, remittances, savings and credit facilities), thus there are few financial alternatives available for them. As a result 60% of the adult population is either excluded or depends on informal financial services according to the 2014 FinScope Survey. Moreover, only 20% of the adult population use formal channels of savings whilst 30% use formal channels of insurance and 11% use formal channels to access credit markets whilst the rest are excluded or informally served. Therefore there is a huge potential market that mobile networks operators can exploit, for instance mobile micro-insurance as evidenced by 70% of the population that do not have any form of insurance. This is also attributed to the perception by the majority that think that insurance is expensive. The FinScope Survey (2014) highlighted that almost 28% of the rural population is financially excluded due to the limited access to banking infrastructure. Thus there is still a huge void to be filled especially through MFS.

Figure 19: Financial Services Access Landscape in Zimbabwe 2014

financial inclusionSource: FinScope (2014)

In terms of access there is also need to address issues of shared infrastructure and interoperability, the ability of the payment systems to interact at various levels, is important in promoting convenience and reduction of operational costs. While payment systems are already interoperable at various stages, there are still significant gaps in the sharing of infrastructure that is hampering access and usage of financial services. For instance the different financial service provider’s platforms have limited interoperability mainly due to competition. Banks and mobile money providers neither able to transact on banks infrastructure such as ATMs and POS machines nor transfer funds across to platforms.

There is need to make provisions on how Mobile Financial Service interoperability within the broader national payments system. This can be achieved by establishing an all-inclusive automatic clearing house for all financial payment service providers (e.g. Banks, Mobile financial services and independent financial platforms). A case in point is the Tanzania Mobile financial services industry’s private sector led interoperability initiative. The firms initially pursued bilateral clearing and settlement procedures that could evolve into some form of multilateral clearinghouse model over time. Thus, bilateral pricing agreements were signed between players in the mobile money industry to allow inter-platform wallet to wallet service in 2014 .

Quality of financial services and products
There is need for financial services and products to meet the needs of the consumer. Thus, quality measures reflect the degree in which financial products and services match clients’ needs, the range of options available to customers, and clients’ awareness and understanding of financial products. The low uptake of insurance products and services in Zimbabwe is because the products do not meet the needs of the population with regards to risk coverage, thus other than focusing on accessing there is need to redefine the product to match clients expectations. However, the quality of financial products and services provided is affected by low levels of financial literacy. Therefore there is need to build the financial capability of consumers by linking individual functions to the financial system. There is need to understand the financial behaviour of the consumers that is;
i. What are their sources of income?
ii. How do they spend their money?
iii. What influences these expenditures?
iv. The cultural beliefs or practices that shape their financial decisions?

Usage of Financial Services and Products
Increasing access and quality of the financial products do not automatically translate into effective use of the products. For instance most users of mobile money platforms view them primarily as services for sending or receiving money according to the 2014 FinScope Survey, with few using the facility to make bill payments (3 %) and for savings (9%). This perception has held back the full scaling of mobile financial services due to little understanding of the services. Thus, whilst a large number of the population has access to these financial services and products, usage rates remains low as the effective use of financial services and products is hampered by asymmetric information and power between financial services providers and consumers which encompasses issues to do with pricing and the cost of the financial services.

Conclusion
For financial inclusion strategies and polices to have meaningful impact there is need by the Central Bank and service providers to go beyond access but also ensure that there is consistent and effective use of financial products service, through continuous consumer education and awareness programs and minimising information asymmetry.Further, research is required to inform the implementation of the financial inclusion strategy.

Article adopted from the Economic Barometer Vol. 20