The Sunday Mail
Business Reporter
Zimbabwe has made steady progress in promoting easy access to financial products and address needs of special target groups through measures that facilitate robust financial infrastructure.
The Reserve Bank of Zimbabwe (RBZ) is coordinating implementation of the National Financial Inclusion Strategy (NFIS), which was launched on March 11, 2016 by Government.
It covered the period 2016 to 2020.
The strategy was implemented following consultations with stakeholders such as Government ministries, the banking sector and financial sector regulatory authorities and development institutions.
Overall, it targeted increasing access to formal financial services from 69 percent in 2014 to at least 90 percent by 2020 and increase the proportion of banked adults to at least 60 percent by 2020.
In a panel discussion at the launch of the Sivio Institute survey report on the state of financial inclusion of micro, small and medium enterprises (MSMEs) in Zimbabwe last week, RBZ deputy director (bank supervision) Mrs Rachel Mushosho said although the central bank is awaiting assessment results of the NFIS, initial indications are that there was significant improvement in financial inclusion.
“We are waiting for the full results to inform us on the baseline statistics that we need to adopt and the strategies that would improve from the statistics that we would have got from Finmark Trust,” she said.
In the four-year period through 2020, the RBZ came up with financial inclusion indicators for three segments – small and medium enterprises (SMEs), women and youths.
“The NFIS1 was looking at financial access and under this pillar; the numbers increased, but there wasn’t much happening except for the opening of accounts.
“Under NFIS 2, we intend to look at usage of formal financial services, the quality of those financial services because it cannot be a one-size-fits-all.”
The central bank is reportedly working with different stakeholders and financial players to come up with tailor-made products for targeted groups. It is believed that the collateral registry, which will be launched in the second half of this year, will also help drive the process. The registry essentially broadens assets that can be used to access loans to include movable assets such as vehicles, equipment, tractors, harrows and ploughs.
The RBZ also resuscitated the Credit Guarantee Scheme to facilitate productive lending to the targeted marginalised groups with inadequate collateral to stimulate economic growth and development.
The scheme is administered by the Export Credit Guarantee Company.
According to the RBZ’s quarterly loan disbursement indicators, of the $300 billion banking sector loans issued as at March 31, 2022, SMEs only accessed 3,9 percent.
Similarly, the Sivio Institute’s survey noted that about 56 percent of MSMEs are financially excluded from the formal financial system largely because of compliance issues.
The institute’s executive director, Mr Tendai Murisa, said the country is performing relatively well in terms of access to financial services.
“Looking at individuals and how they have sort of accessed bank accounts, we feel by the measure on number of accounts opened, use of fintech (financial technology), banking on phones, access to insurance at an individual level, it definitely improved and Zimbabwe scores well compared to other countries,” he said.
However, enterprises were struggling to register their businesses as the process was considered to be very complicated.
“The system is not thoroughly decentralised. There are many costs to registration and once you are registered, the compliance cost year to year, (and) tax clearances, push many people into informality.
“But when they are informal, the banks cannot deal with them,” he said.
The RBZ, with support from development partners, established a credit registry system (CRS) to enable lenders to determine the level of indebtedness and credit history of current and potential borrowers.
CRS had eliminated challenges of information asymmetry between borrowers and lenders, which is expected to enhance financial inclusion, lower the cost of credit and contribute towards sound credit risk management.
“There are also some ICT systems that we are working with the authorities to enable producers to use commodities as collateral and access finance from the formal channels,” added Mr Murisa.
The Sivio survey results indicated that the national average for financial inclusion among MSMEs was at 44 percent.
However, there were other regions that are lower than the national average.
“Provinces that are doing well are Matabeleland South and Mashonaland West, which are above national average. But there is no one above 70 percent, with all hovering around 50 percent,” he said.
Micro enterprises were reportedly prominently involved in retail, vending and agriculture sectors. The report said the average annual turnover of micro enterprises was US$7 589, small enterprises US$76 647 and the average for medium enterprises was US$803 022.
It was also observed that founders of enterprises use many sources of funding to gain sufficient access to start-up financing.
“Eighty percent of founders used their personal savings to start their businesses. Informal relationships are more significant for enterprise development in Zimbabwe than relationships with financial institutions.”
Only 7 percent used banks and 6 percent used microfinance institutions to secure funding. Government, credit unions and local NGOs have contributed start-up financing for only 1 percent of the enterprises.
Mobile phones and financial technology have improved rates of access to financial products and services.
According to Mr Murisa, the most prominent services on mobile money services are provided by Econet Wireless through the EcoCash platform and ZIPIT Smart provided by Zimswitch.
“We ascertained that up to 97 percent of all MSMEs that use mobile money will use EcoCash at some point, 30 percent will use ZIPIT Smart and up to 19 percent will use One Money (NetOne).
The survey noted said that more than half of enterprises in rural and urban areas have a mobile money account. Early stage financing for SMEs remained largely unavailable.
“We don’t have early stage financing in the ecosystem for SMEs. Efforts should be made to have institutions that proffer especially venture capital finance.”
Green financing and consumer protection, he said, were key components of financial inclusion.
A senior economist at UNDP Zimbabwe Mr Ojijo Odhiambo said in the absence of financial education not much could be achieved in financial inclusion.
Founding director of the Labour and Economic Development Research Institute of Zimbabwe (Ledriz) Dr Godfrey Kanyenze said there should be proper frameworks to guide financial sector products in the best interest of consumers. He said there was very little uptake of insurance and reinsurance products because the framework does not speak to consumers.
