‘Financial inclusion strategy needs informal sector’
ZIMBABWE’s financial inclusion strategy can be best implemented if it is in sync with an informal sector strategy, according to University of Zimbabwe (UZ) economics Professor Ashok Chakravarti.
The monetary authorities are targeting to increase access to banking services from an estimated 30 percent last year to 90 percent of the population by 2020.
Reserve Bank of Zimbabwe (RBZ) last year launched the National Financial Inclusion Strategy targeting mainly the rural population, smallholder farmers, micro and small-to-medium enterprises, women and youth. These groups account for the bulk of the economically active population.
However, in an interview with The Herald Business, Prof Chakravarti said the National Financial Inclusion Strategy (2016 – 2020) is rather “narrow”.
He said the National Financial Inclusion Strategy needs to be linked with an informal sector strategy or policy.
“Financial inclusion cannot be seen in a narrow banking way; it’s part of a broader problem relating to the informal sector as how you can bring the whole informal sector into the formal economy. It’s a broader issue.
“That’s why I say the central bank should not just look at financial inclusion in terms of banking or not banking. So you have got to have a financial inclusion strategy that includes an informal sector strategy. The question I’m raising is that say you want an SME to open a bank account, normally the individual is required to be registered with the tax authorities, but he/she may not want to register with the tax authorities. So the fact that I am excluded has nothing to do with the banking system, but to do with the entire regulatory environment,” said the UZ economic professor.
The National Financial Inclusion Strategy, on the whole aims to increase access to banking, micro-finance, insurance and capital markets and is anchored on financial innovation, financial literacy, consumer protection and microfinance.
Macroeconomic and Financial Management Institute of Eastern and Southern Africa (MEFMI) executive director Dr Caleb Fundanga, said in order for financial inclusion to be entrenched within the SMEs sector, traditional banks need to leverage on mobile money.
“With mobile money, things have changed totally. Most commercial banks are closing branches because it’s too expensive to run brick-and-mortar. Banks should increasingly embrace digital platforms themselves,” he said.
And Prof Chakravarti agrees: “Mobile banking has much easier access and that’s why people are much happier to get into mobile transaction than actually opening a physical bank account. So we need to think about how better digital platforms can be used to increase financial inclusion,” he said.