eBusiness Weekly
Kenneth Kenniard Gandawa
On March 11, 2016, the Reserve Bank of Zimbabwe launched a National Financial Inclusion Strategy (NFIS) programme set to run a five-year course.
The thrust on this was to reduce financial inclusion of the estimated 95 percent unemployment rate in the country.
When one looks at the figures of the unemployed, one gets the understanding that there is a lot to be desired in the financial freedom of the majority of the citizens in Zimbabwe.
With little or no financial freedom, the local market is at a recalcitrant low and not much can be done to increase the economic activities that inadvertently lead to the growth of our GDP as a country.
With the FNFIS, one of the goals is to promote the formalisation of the economy.
Simultaneously, the programme aims at increasing the number of formal sources of credit which ultimately may be pointing towards micro-financiers in general. One may very well as why micro-finance Institutions in this very nationalistic macro challenge?
The answer is simple, micro-finance institutions work with the 95 percent members of the population and, in redeeming them to financial freedom, sets the tone for a very active economy which is what we need as a country presently.
Perhaps it is apt to use the RBZ definition of financial inclusion.
It states that financial inclusion is “when individuals and businesses have the access to useful and affordable financial products and services that meet their various needs in transaction payments, credit and savings”.
With an unemployed stamp on one’s back, there is little to no chance of getting a bank loan which stipulates pay-slips as a major requirement.
This is where micro-finance institutions come in.
Over the past four years, the country has seen a marked increase in Licensed Micro-finance Institutions and a number of these have contributed to the increase in Active Loan clients.
For instance, within the period of the 2017-2019 financial year, micro-finance institutions increased from 184 to 194 between September of the former and September of the latter.
Loan portfolio values collectively increased from $211,83 million to $335,33 million recording a 58,30 percent increase showing how actively micro-finance institutions are penetrating the economically excluded markets.
Further attesting to their success is the 8,16 percent profit margin they recorded within this hyper-inflationary period of economy.
What really makes micro-finances a definite key for financial inclusion is their ability to penetrate rather remote areas of the market.
Banks have seen the trend and started out with vendor points in various retail shops but their formal make-up makes them a rather alien partner for those who are only just participating in trade for a livelihood.
Vendors and informal traders make the bulk of the informal sector which become the target for most financial inclusion objectives.
These are still to grow to the economic levels of savings and banking thus making it difficult for them to approach banks for a loan facility. Therein lies the role that micro-finance institutions can fulfil successfully and in acknowledging that role, there is much that the nation can gain towards achieving NFIS goals.
