HOW CAN GOVERNMENTS PROMOTE FINANCIAL INCLUSION FOR WOMEN: THE ZAMBIAN CASE Bank of Zambia Presentation by Dr. Tukiya Kankasa-Mabula, Deputy Governor Administration, Bank of Zambia (BoZ). Second African Women's Economic Summit, Lagos, Nigeria: 13 14 July 2012. 1
Outline Introduction. Background and Overview of Access to Financial Services in Zambia Zambia s Financial Sector Development Plan (FSDP) 2005 and 2009 FinScope Surveys Initiatives and Challenges to Increase Access Conclusion. 2
Introduction A principal obstacle to economic growth in Africa in general has been the state of the financial sector. In most African countries, the majority of women lack access to financial services and remain unbanked and financially excluded. There has therefore been concern at national levels across the continent that a vast number of the population are financially excluded. Various measures are therefore being formulated to encourage the expansion of financial coverage and deepen financial inclusion. 3
Introduction Defining Financial Inclusion What do we mean? knowing what one's financial options are and having access to products and services to choose from. Those who involuntarily have no or only limited access to financial services are referred to as the unbanked or financially excluded. Focus is thus not just about access to finance but access to financial products and services that are affordable and appropriate or suitable for one s needs. Financial inclusion is therefore a top Government agenda in several African countries. 4
Introduction Having access to financial services for an individual means that he or she is able to store funds safely, invest them productively, or use them when needed as a means of exchange for goods and services. An increased level of access to finance is associated with economic growth and better income distribution, which ultimately leads to a greater social interrelation and to poverty reduction. Therefore the success of any group of people seeking to improve their own prospects for prosperity largely depends on their access to mainstream financial institutions that can help them save money, buy homes, access credit, start businesses, and otherwise build wealth. 5
Introduction Zambia, like many other developing countries, has a vast number of people, potential entrepreneurs, small enterprises and others, who are excluded from the financial sector. Those with access are often exploited by high costs/fees. To address this anomaly, increasing access to a greater number of the population in Zambia has become one of government s priority areas in recent years. In this regard a lot of effort is currently underway to introduce various new measures to encourage the expansion of financial coverage in the country. Given the significance of this matter, the Government has taken a leading role to promote financial inclusion for the under-served, particularly women. 6
Background and Overview of Access to Financial Services in Zambia In the late 1990s and early 2000s, several large banks in Zambia closed their rural branches in preference for corporate clients in the big cities. The withdrawals were extended to smaller towns considered to be low revenue centres. Access was worsened by the closure of a number of stateowned institutions, including LIMA and Cooperative Banks which provided services targeted at the agriculture sector. This divestment, slowly, saw the private sector increasingly take up the responsibility of provision of financial services with several local banks and MFIs being licensed in the last few years. We now have 19 banks & 100 non-bank financial institutions. 7
Background to the National Strategy Detailed financial sector assessments were done (in 2003) which high-lighted some of the following weaknesses: - Low financial intermediation; - Limited financial access for the rural and peri-urban; - Withdrawal of bank services in rural areas (late 90s / early 2000s); - Poor credit culture; - High interest rates and cost of banking; - Limited long-term development & housing finance; - Low financial literacy - Limited knowledge on the financial sector demand; supply and market opportunities countrywide. 8
Zambia s Financial Sector Development Plan (FSDP) In response to this, the Government formulated the FSDP in 2004 as a national financial inclusion strategy to address the noted challenges and to broaden and deepen Zambia s financial system. The FSDP reforms are coordinated by BoZ. FSDP now in Phase II & focuses on 3 main pillars: - (i) enhancing market infrastructure; - (ii) increasing competition; and - (iii) increasing access to finance. 9
FSDP Reforms for Financial Inclusion A number of reform areas were proposed under the FSDP some of which included the following: To undertake research on the demand and supply of financial services and products through the FinScope model. Undertake legal reforms to modernise and harmonise laws and regulations in line with modern trends and international best practice. Recapitalisation of state owned financial institutions and implementation of strategic business turn around plans Increase of financial access coverage across the country through initiatives such as mobile banking and a rural finance programme. Facilitation of bank branch expansions and introduction of innovative products. Financial education & related consumer awareness campaigns. 10
2005 and 2009 FinScope Surveys In 2005 a FinScope Consumer survey was conducted as a component of the Financial Sector Development Plan. This was intended to strengthen understanding of the financial market s dynamics from a consumer perspective. The survey was also intended to guide Government and commercial service providers in their efforts to promote better access by all Zambians to appropriate financial services, A follow on FinScope Consumer survey was then conducted in 2009 to assess the levels of improvement. 11
2005 and 2009 FinScope Surveys The findings of the two surveys showed that levels of access to financial services by Zambians were very low. The results of the 2005 showed that the access to financial services was 33%, with over two thirds of Zambian adults, 67%, without access to financial services. The results of the 2009 study showed that access to financial services by the adult Zambian population had only marginally improved from 33% to 37% signifying a need for further efforts. Of this number, only 14 15 % of adults are banked. It was further noted that most Zambians were using sub-optimal high-risk, high cost solutions, such as keeping their cash under the mattress or unregulated saving clubs, transferring cash by taxi or bus, borrowing from family and friends or even loan sharks, and limited use of insurance (estimated at only 4% penetration countrywide). 12
2005 14.6% 7.8% 11.3% 66.3% Increased Total Inclusion 2009 13.9% 9.3% 14.1% 62.7% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Have/use a bank product Dont have/use a bank product but have/use a financial product from a formal non-bank FI Dont have/use a formal financial product but have an informal financial product Dont have/use any financial product FinScope Zambia 2005-2009 - Increased Financial Inclusion 13
GEOGRAPHIC LOCATION LEVEL OF FINANCIAL ACCESS IN ZAMBIA (2009 survey results) URBAN 42.0% RURAL 34.4% KEY NOTE: Rural Areas where most women are involved in agriculture continue to be equally under-served. 14
Statistics on access to finance Further Breakdown on the Comparison of Access to Financial Services Between Urban & Rural Areas in Zambia 15
GENDER Level of Financial Access By Gender (2005 survey results) MALE 35.6% 40.8% Level of Financial Access by Gender (2009 survey results) FEMALE 31.6% 33.9% KEY NOTE: Marginal increases noted from 2005 to 2009 results with women still largely under-served. 16
Comparison of Access to Financial Services By Gender 17
Initiatives To Increase Access Legal Reforms A number of laws were modernised to include tiered capital levels particularly for NBFIs to facilitate new entrants and innovative products. State owned financial institutions were given fresh capital injection by Government to enable them play a bigger role in providing access to finance. Mortgages from the Building Society Development funds from the Development bank SME financing and rural branch expansion by the National Savings & Credit Bank Development of a financial education strategy for Zambia which will include a component for women. 18
Initiatives To Increase Access Follow Up Actions and Interventions include: Triggered innovation in product design by banks/nbfis with products for women (e.g DIVA accounts, Indo Zambia bank women products for MSMEs). Identification and removal of legal, policy, regulatory or market obstacles to innovation.(e.g Demountable branches, agencies, MFIs, used to expand outreach). Development of strategies for the expansion and improvement of financial access for all (e.g FAMOS). Increased role of State enterprises (ZNBS, NSCB, DBZ) Various Govt efforts (e.g CEEC, Rural Finance Program). 19
Initiatives To Increase Access Market Initiatives The development of a national FSDP strategy and the subsequent market research such as the FinScope survey has provided financial service providers valuable market information to improve service delivery and achieve greater outreach. Subsequently we have seen increasing signs that some commercial institutions are re-positioning their product offerings around the lowerincome mass market. This is evidenced by an expanding range of lower-cost products that are now available in the market. For instance some commercial banks have begun to offer more financial products and services particularly in retail and community banking with minimal fees. This expansion has also been noted in the microfinance sector (from 3 registered MFIs in 2006 to 30 in 2012) which has grown largely to fill the supply gap for finance that arose from the closure of banks and branches in rural and peri urban areas. 20
Initiatives To Increase Access Market Initiatives We have seen the entry of new banks and other non-bank financial institutions to provide different products to suit the market (with 5 new banks having been licenced in the last 3-5 years); With facilitative regulations, there are also innovations relating to the use of mobile banking through cell phones and other such facilities making banking easier; In addition, there are agency relations that are coming up in the market. For instance there is an agency banking initiative between ZAMPOST (the postal offices countrywide) and ZANACO Bank, which has facilitated withdrawal and depositing of funds from Post Offices dotted around the country. 21
Initiatives To Increase Access Government Initiatives The presence of a national FSDP strategy has assisted in pushing access to the top of government s financial policy agenda. The 3 year extension of the FSDP is a sign of this continued commitment. Government s emphasis on the need for financial inclusion for all citizens is also evidenced by the company shares floated to the Zambian citizens in several public limited companies. The privatization of Zambia National Commercial Bank and the subsequent listing of the same on the Stock Exchange is one such avenue the Government has used to increase access for the citizens of Zambia. The enactment of the Citizens Economic Empowerment Act to provide low cost financing to SMEs and preferential terms for services offered to public institutions by locals is another strategy that has been used through the Citizens Economic Empowerment Commission (CEEC). 22
Initiatives To Increase Access Government Initiatives The Government as shareholders of state-owned non-bank financial institutions (NBFIs), such as, the National Savings and Credit Bank (NSCB) and the Zambia National Building Society (ZNBS), have continued to support these institutions in order to broaden and increase the services to their current market. NSCB and ZNBS have since established their market among the lowincome population. Currently, NSCB has 29 branches in different districts of Zambia and there are intentions to open more branches in the rural areas. ZNBS has a network of 19 branches countrywide aimed at reaching a wide sector of the population. As part of its credit provision strategies, it has also introduced friendly loans (small short term loans of up to K50 million or $10,000 equivalent ) for general use (payable over 1 2 years). These credit facilities are being accessed by the low income individuals and small scale entities often with some targeted funding for women running SMEs. 23
Initiatives To Increase Access Bank of Zambia (BoZ) Led Initiatives include: Implementation of the FAMOS Check Tool. Facilitating innovation in product design. Identification and removal of legal, policy, regulatory or market obstacles to financial sector growth, innovation and competition. Development of strategies for the expansion and improvement of financial access for all. (The current BoZ strategic plan includes financial inclusion as a key objective for the bank). Consumer awareness campaigns (Through Trade Fairs, Commercial Shows, Media Briefs, Publications, Sensitization Tours, etc) 24
Initiatives To Increase Access BoZ Led implementation of the FAMOS Check Tool has involved: Training of commercial bank staff to apply the FAMOS Check Tool. Creation of a Task Force aimed at: increasing access to formal finance by women entrepreneurs. increasing awareness and spearheading the institutionalisation of the FAMOS tool concept. coordinating efforts towards women s entrepreneurship development & business growth. 25
Role of Government and Other Stakeholders in promoting financial inclusion for women Ensuring That Stakeholders Pull In the Same Direction through wide consultations. Facilitation of special lines of credit (e.g ADB lines of credit for women projects with 2 banks in Zambia already doing this). Public-Private partnerships & donor involvement. Technical & financial support. FAMOS Check Task Force for instance set up under BoZ. Facilitation of training for assessing women projects & financial literacy. 26
Role of Government and Other Stakeholders in promoting financial inclusion for women Appropriate framework and oversight required for sustainability; Stable Macroeconomic environment essential; Targeted intervention such as outreach programme to cover all districts of Zambia. (In 2010, 14 districts were initially unserved now down to 5). Credit Reference Bureau to address poor credit culture; Financial Education programmes. Relaxed or risk based & permissive KYC Guidelines (see next slide); 27
National registration card 83.6 85.6 Bank statements 3.8 12.2 Enhancement of National Registration/ Identity Card (NRC) to include biometric technology coming (2013). Payslip Passport Electricity/water bill Driver's licence 3.8 1.8 1.2 1.5 10 8.7 8.5 7.2 2.6% of the unbanked have the minimum documents required to open a bank account 43% of the currently banked do not have the minimum documents required to operate a bank account Hence there was need for a rethink of minimum requirements? Insurance policy documentation 2.5 1.3 KYC Practice Note reference letter by headman, clergy may now be acceptable under the new BoZ guidelines issued in Oct. 2011. 0 10 20 30 40 50 60 70 80 90 KYC - Access to Documentation Rural Urban 28
Challenges Financial Inclusion Initiatives need to be: Simple and easily manageable, with well-defined objectives and well sequenced; Owned by the relevant local stakeholders; Aimed at building local capacity; Well coordinated with interventions financed by actively engaged partners; Robust with monitoring & evaluation framework; Able to learn from others & make use of regional and international best practices. 29
Challenges & possible controversial aspects Difficulties in coordinating & decision-making given women s cultural complexities; Risk of resistance to change, in particular new rules/policies; External challenges against market competition; Limited uptake capacity by a number of women for dedicated funds when sourced; Limited participation in decision making roles to be able to influence policies. (e.g. SADC protocol to increase women positions still a challenge). 30
CONCLUSION With all the highlighted concerted efforts particularly with the impending implementation of the National Strategy for Financial Education in Zambia, we are confident that access to finance for women will be increased from the current low levels of under 34% to at least 50% in the medium term. There is however need to understand women s financial requirements through desegregated information to facilitate targeted interventions and ensure results are not achieved by accident. The Government of the Republic of Zambia, remains fully committed to promoting financial inclusion for women and has even appointed a full Cabinet Minister on Gender to ensure that this is achieved. For the Zambian case, the Government has demonstrated that by formulating a coordinated financial sector development strategy, financial inclusion for women can be achieved. 31
THANK YOU! 32