Cash crisis bolsters RBZ plan

About 70 percent of Zimbabwe's 13 million citizens are financially excluded, the NFIS showed

THE liquidity crunch currently roiling the country's financial markets will make it easy for the Reserve Bank of Zimbabwe (RBZ) to achieve financial inclusion.

The RBZ had targeted the end of 2020 to integrate almost everyone into the financial system.

Zimbabwe has an informal sector estimated to be holding about US$7 billion outside the banking system.

In its report for the first quarter of 2016, the Financial Clearing Bureau (FCB), the country's leading credit clearing firm, said while the cash crisis is biting, it presents a "silver lining" towards financial inclusion as diminishing cash reserves in the informal sector could force players to join the technology-based banking system in order to transact.

The cash shortages have forced the central bank to announce plans to introduced bond notes to improve liquidity at a time when reports indicate a sharp rise in the number of Zimbabweans opening bank accounts.

The country's banking system has also taken electronic banking seriously.

All banks are connecting new account holders to transact on platforms ranging from point of sale machines (POSs) to automated teller machines (ATMs) when they open accounts.

"Given the current, so called, cash crisis and the resulting pressure on the informal sector and those formally employed to open a bank account, if they have not already, it is quite likely that the above targets could be met even by the end of 2016!," FCB, which has been operating since 1990, said in the first quarter report.

"So the cash crisis may have a silver lining, but it should not distract us from the fundamentals that will make financial inclusion a sustainable success," the report added.

Financial inclusion came under the spotlight in March when the RBZ unveiled its strategy to push the number of consumers accessing banking services to 11,7 million by 2020, from current levels of 3,9 million. The National Financial Inclusion Strategy (NFIS) launched on March 11 will revolve around technology-based banking platforms, whose growth has been underpinned by a robust mobile telecoms industry with 19,5 million subscribers.

Statistics unveiled at the launch of the NFIS revealed that access to banking remains a privilege for only a few, despite an Information Communication Technology (ICT) revolution that has networked all facets of the economy.

About 70 percent of Zimbabwe's 13 million citizens are financially excluded, the NFIS showed.

And experts have indicated that efforts to integrate them into the formal financial system would depend on the response of other stakeholders like power producers. The banking sector has evolved technologically, but deposits have been disappointing. RBZ governor, John Mangudya, has a difficult task of encouraging banks to embrace previously unbanked people, attract consumers and improve liquidity for on lending to failing industries. At US$5,6 billion in 2015, banking sector deposits were lower than the estimated US$7 billion believed to be circulating outside the financial system. Depositors fled banks after confidence slumped due to bank failures between 2003 and 2008. Between 2012 and 2014, depositors lost US$185 million after three banks collapsed, further pushing potential depositors into the informal sector.

But now, with hard cash drying up, FCB says this will have a strong bearing on the drive towards technology based banking.

"According to the NFIS paper recently circulated by the RBZ, its vision is to have an inclusive financial system that is responsive to the needs of all Zimbabweans and its mission is to facilitate access to usage of quality and affordable financial services by all Zimbabweans. The overarching goals of the NFIS are; (1) to increase the overall level of access to formal financial services within the country from 69 percent in 2014 to at least 90 percent by 2020, and (2) to increase the proportion of banked adults from 30 percent in 2014 to at least 60 percent by 2020…low income levels, failure to meet minimum account opening requirements, inadequate information on financial services and products, lack of confidence in financial system, financial illiteracy and inflexible implementation of AML measures are cited as the principle issues," the report said.