adminFINANCIAL inclusion or inclusive financing is the delivery of financial services at affordable costs to sections of disadvantaged and low-income segments of society, in contrast to financial exclusion where those services are not available or affordable. Financial literacy can be defined as the knowledge and understanding of personal finance concepts and the skills, motivation and confidence to make informed financial choices, and participate in economic life.
Sustainable development advocates and other NGO groups alike, including policymakers and government departments, should be concerned that the population lacks a working knowledge of financial impressions and do not have the implements they need to make decisions valuable to their economic well-being.
Such financial literacy scarcities in any economy like Zimbabwe can affect an individual or household’s day-to-day money management and ability to save for short and long-term goals such as buying a goat at the bottom of the pyramid, to purchasing a home at the top of the pyramid, seeking elementary and primary education to tertiary education, or buying fertiliser for subsistence farming to financing retirement. Financial illiteracy can result in activities that make the population vulnerable to severe financial crises that may be triggered by very small events.
Financial Illiteracy in Zimbabwe is widespread among the general population and particularly acute among specific demographic groups, such as women, youth, farm labourers of foreign origin, and those with low educational accomplishment. To be able to maintain financial inclusion at a certain level and grow the numbers, there is need for comprehensive awareness programs to educate the population so they can move from the ordinary Cash in, send money and cash out transactions.
In order to impact lives, digital financial services should now move from concentrating on the number of active accounts, to how people are using mobile financial services. For a private company the activity ratio statistic is very essential as a measure of performance but is it sustainable. We need a mobile money legacy something that parents are proud to teach their children and grandparents are proud to have been part off.
Transferring money, cash in and cash out are the most popular use cases for mobile money, but, are they only ones? Society should be allowed to learn, or be taught about bill payments, merchant payments and most importantly savings and insurance. I.e. micro savings and micro insurance all supported on a mobile money platform.
We as a country need to bring back the culture of savings. Savings no matter what size can be used to level up or smooth-en cash flow-progressions. Instead of merely keeping the funds in a non-interest bearing mobile wallets, funds can be saved in interest earning savings accounts that can be opened on the go but are linked to the banks – an opportunity for cheap deposits for banks.
The uniqueness of every individual.
The interest earning savings accounts can be tailor made to meet the needs of the unique individual or a unique group of individuals.
1) If a customer or a group of customers are interested in their children education their primary motive for saving may be to pay school fees, there should be an account that offers exactly that. A three months fixed deposit account that only accepts deposits and will only allow withdrawals after that period.
2) A customer might be saving to pay lobola (bride price) they should be able to open a savings account that will allow them to deposit a certain amount monthly weekly or daily over a certain period of time.
The accounts can reward the customers if they can manage to honour whatever they contractually sign for in terms of frequency and amount of deposits.
The tight spot
Most of financial information in Zimbabwe is educating the population on how to borrow to start a business or to smooth-en cash flows. Its teaching customers how to borrow to finance recurrent consumption, thus people are borrowing from the future to finance current consumption. This can be a trap if not properly managed. We’ve experienced people at the bottom of the pyramid losing their most priced assets like goats and cattle due to failure to service a debt. Micro-finance institutions are duty bound to encourage lending but without proper financial education, our people are borrowing to buy bread.
Government, Non-governmental organisations, donor agencies should come in to help teach and educate the population responsible financial lessons. Financial education can even be introduced to schools and taught at a tender age. It’s rare to see a pupil in Zimbabwe with a piggy bank and yet we want to promote a culture of saving.
Financial literacy will act as bridge from mere financial inclusion to sustainable financial inclusion. The poor need to learn to live within their means. The extras that they get should be saved either as a group of individually for future use.
In the Field
Financial literacy will help the peasant farmer to know that instead of borrowing every season to pay for seed and fertiliser, they can actually save as a group or individually and buy even at discounted prices if they buy in bulk for the group. Better still they can form Savings and Credit Co-operatives with a special mandate to assist them in farming. The advantages of numbers is it brings commitment and the poor can buy at discounted prices.
The need for borrowing will always be there but this can be done at local level at reasonable interest rates within the savings and credit co-operatives. The good thing is the interest earned will come in as a profit to the co-operative.
With financial literacy Peasant farmers can now afford to move away from contract farming that is unfair. Adequate financial education will help the farmer to sell their produce to other buyers offering best prices.
Insurance as a challenge at the bottom of the pyramid
Insurance is major challenge at the bottom of the pyramid in Zimbabwe which is leading to poor sustainable inclusion statistics.
People farm but it’s not every season that they harvest, thus the need for micro crop-insurance schemes. The loss of a loved one has always been a challenge to the living. There are cases where surviving children are left with nothing because every meaningful asset that their parents had is disposed of to fund the funeral.
Do we have to kill the living in order to bury the dead? Zimbabwe do we really have to kill the living in order to bury the dead? Financial literacy can help the poor to sign up for micro funeral assurance policies so we don’t kill the living, let the dead bury themselves through mobile insurance offerings like EcoSure.
There is not much literature on micro savings in Zimbabwe, as there is on micro lending, but we are strongly inclined to believe that financial education will lead to micro savings and micro insurance on mobile money platforms. Micro savings and insurance can, by transmission mechanisms create micro investments and in the long run create employment, even if it comes as self-employment, it’s still sustainable and helps in poverty alleviation.
Personal financial education is critical to achieving sustainable financial inclusion, impact the bottom of the pyramid in Zimbabwe to bring financial independence at the bottom of the pyramid in the long run.
As part of the broader solution to the national concern on financial inclusion as advocated by the Reserve Bank of Zimbabwe , personal financial education is necessary as a catalyst to financial inclusion and a bridge from financial inclusion to sustainable financial inclusion.
Posted by Financial inclusion for Sustainable Development Zimbabwe
FisdZimis an organisation that is concerned about poverty alleviation through digital technologies in Zimbabwe
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