Financial inclusion critical to Government social safety net transfers, economic growth


By Buumba Chimbulu

BROADER financial inclusion and services cannot only benefit the poor, but also coincides with greater local economic activity and decreased economic inequality at the macro-economic level. Financial inclusion is a delivery of financial services at affordable costs to sections of disadvantaged and low income segments of society. It is a key enabler to reducing poverty and boosting prosperity. But for a country to promote and achieve financial inclusion, there is need for financial literacy and this calls for improved awareness of available services especially through the media. According to the 2015 FinScope survey, financial inclusion levels in Zambia increased from 37.9 percent in 2009, to 59.3 percent in 2015, due to improved awareness, as well as use of services by the public. The survey showed that the number of adults using financial services increased from 2.4 million in 2009, to 4.8 million in 2015. The survey findings showed that there has been significant increase in financial inclusion since 2009 resulting in the national target of 50 percent financial inclusion being exceeded. During the period under review, exploring trends in formal and informal inclusion since 2009,  findings indicate that the significant drop in financial exclusion among Zambian adults since 2009 was driven by increased uptake of both formal and informal services. Therefore, the media has an important role to play in creating awareness while fighting against financial illiteracy which is a barrier in achieving financial inclusion in Zambia. To this effect, the Financial Sector Deepening Zambia (FSDZ) and the Zambia Institute for Policy Analysis and Research (ZIPAR) realised the important role that the media plays in promoting financial inclusion. The two institutions organised a media economic and financial literacy training to inform them on what role they can play in increasing financial inclusion in Zambia. The media economic and financial literacy training ran from September 26 to 30 2016. During the training, FSDZ chief executive officer Betty Wilkinson said there is need for the media to disseminate information on financial services provided in Zambia in an effort to increase financial inclusion. According to Ms Wilkinson the media should endeavour to report more on financial issues in more simplified manner for people to understand and make informed decisions. This will enable people in the rural areas to understand and appreciate financial products being offered in the country. Ms Wilkinson also said financial service providers need a comprehensive understanding of the financial behaviour of financially excluded population and the factors that prohibited them from using financial services. “Despite the increase in financial inclusion levels, Zambia remains relatively low pointing to the need to build further momentum around the financial access priority of all stakeholders,” she said. The merits of financial inclusion that can come as a result of awareness by the media and other means are strongly rooted in empowerment. By empowering individuals and families to cultivate economic opportunity, financial inclusion can be a powerful agent for strong and inclusive growth. Access to credit is a key link between economic opportunities and economic outcome. On the other hand, traditionally, regulators would have focused on devising risk-based regulations for digital financial services (DFS), so as to ensure sound, supportive regulatory frameworks for the new products and services, with little thought to the uptake and use of services. However, a growing number of regulators see DFS as having great potential to support their financial inclusion goals, are keen to see it succeed, and are actively working to ensure end-users are provided with safe, affordable and practical payment options. DFS is also another way of increasing financial inclusion but meaningful awareness of DFS is very low among Zambians. This calls for the need to raise more awareness on the benefits of using DFS in Zambia to promote financial inclusion of the unbanked population. According to the report from United Nations Capital Development Fund (UNCDF) which is the UN’s capital investment agency, awareness of DFS is very low in 48 least developed counties which included Zambia. UNCDF mobile money for the poor programme regional technical specialist Nandini Harihareswara said at the training that DFS hold an enormous opportunity for greater financial inclusion. According to Ms Harihareswara, DFS have the capacity to expand basic services, hence the need to raise awareness on the need to use DFS among the rural community.  “DFS are a powerful means to expand access beyond financial services to other sectors, including agriculture, transportation, water, health, education, and clean energy. “Meaningful awareness of DFS is very low in Zambia, most people do not know the benefits of using DFS. DFS are quick and affordable and can be used at any time,” she said. Ms Harihareswara explains that this is possibly one way to increase revenue for the providers and agents, adding that this will ultimately lead to more financial inclusion of the largely unbanked population in Zambia. She further noted that UNCDF is currently working with FSD Zambia in addressing the challenges faced with regards to the use of DFS in the country At the same workshop, ZIPAR executive director Pamela Kabaso pledged to promote economic and financial literacy to help citizens understand the liberalised economy and opportunities offered by potential investment. Dr. Kabaso said the media could promote financial literacy by reporting facts and analytical economic news. She also urged journalists to take interest in economic policy developments in Zambia to facilitate policy dialogue among key stakeholders that could enhance economic governance. Dr. Kabaso also said Zambia had over a decade experienced high economic growth but achieved less than satisfactory reduction in poverty. “Among the reasons for this puzzle has been limited economic and financial literacy. This is because the economy is liberalised. The opportunities offered by new economy required a population capable of recognising opportunities and defining the risks associated with such potential investment,” she said. In supplementing efforts made ZIPAR and FSDZ to increase financial inclusion, the central bank in collaboration with the Ministry of Finance is developing a financial inclusion strategy. This strategy is expected to help promote a more effective and efficient process to achieve financial inclusion in the country. Senior analyst research and regulator policy at the Central bank Banji Milambo revealed that the financial inclusion strategy would involve among other things financial education. Mr Milambo said it would also involve building the necessary infrastructure and building capacity in Small and Medium Enterprises (SMEs) to be able to provide bankable documents that will convince the banks to lend money to them. “There are a number of things that we are doing to ensure financial inclusion in the country, for example, BoZ together with Ministry of Finance is developing what we call a financial inclusion strategy which will involve financial education, building necessary infrastructure among other things and will target everyone in the country,” he said. The financial inclusion strategy is expected to be put in place by January next year. On the policy makers’ side Government is appealing to the banking community to roll out robust advocacy campaigns aimed at increasing financial literacy levels in the country. Minister of Commerce, Trade and Industry Margaret Mwanakatwe said these advocacy campaigns should especially be targeting the rural population where financial illiteracy levels are high. Ms Mwanakatwe noted that Government was ready to work with the banking and financial services providers in the country to ensure that financial and banking services are accessible and affordable in order to capture more people in rural areas. “I would like to take this opportunity to urge the banking sector as well as other financial services institutions to take this as a challenge and map strategies aimed at capturing the unbanked population in the country,” she said.She said Government through the Bank of Zambia (BoZ) under the financial sector development plan project is already working with the industry players in the financial services to expand financial inclusion in order to improve the lives of Zambians.Ms Mwanakatwe says this project is based on the premise that being able to secure savings and other financial services will better enable the poor to build financial security and manage financial shocks by investing in income generating activities which ultimately improve the quality of life.As a key enabler for development, financial inclusion is firmly placed on the agenda of most governments as a significant policy priority.Furthermore, a broader outreach of finance enables talented newcomers from disadvantaged groups to be empowered and can have a larger impact on the design and implementation of other development policies. Financial inclusion can improve the efficacy of government payment of social safety net transfers and the new types of financial innovation can lower transaction costs which can bring more private sector involvement in international development. In all likelihood, the financial inclusion agenda will have a major role in the post 2015 sustainable development agenda.