Ministry of Finance Unexpectedly Slashes Financial Inclusion Target
Gerald Hamuyayi, Lusaka, Monday, 18 March 2024
– In a startling move, the Ministry of Finance and National Planning has slashed Zambia’s annual Financial Inclusion target by a colossal 33%. At the Launch of Zambia’s second National Financial Inclusion Strategy (NFIS II) on 13 March 2024, the target rate was cut to approximately 2.0 percentage points per year for the period spanning 2020 through 2028, down from 3 percent.
According to the World Bank, the Financial Inclusion Rate assesses the proportions of individuals and businesses that have access to a variety of useful and affordable financial products and services that meet their needs. This includes financial initiatives such as mobile money, transaction accounts, investment securities, insurance and credit delivered in affordable, responsible and sustainable ways.
The FinScope Survey, a research tool pioneered by FinMark Trust, serves as a yardstick for gauging financial inclusion, measuring metrics such as access, usage, demand, and behavior of the adult population towards financial services. According to the Bank of Zambia’s 2020 FinScope Survey, the average annual Financial Inclusion Rate in formal or informal financial services has been increasing since 2009, almost averaging 3 percentage cumulative growth. The rate rallied from 37.3 percent in 2009 to 59.3 percent in 2015, and further to 69.4 percent in 2020, as highlighted in the graph, “FinScope Financial Access Strands.”
The recently launched NFIS II aims for an 85 percent inclusion rate by 2028, up from the 2020 achieved rate of 69.4 percent. By linear interpolation, this suggests an estimated cumulative increase of 2 percentage points per year, a significant drop compared to the average of 2.9 percentage points recorded from 2009 to 2020 as depicted in the Financial Inclusion Annual Growth graph. The new target of 2 percent per year appears to lack ambition, considering Zambia’s historically robust financial inclusion growth rate and the recent surge in the use of mobile money services. Therefore, financial inclusion is projected to have hovered around 75.3 percent by the end of 2023. Given the critical nature of financial inclusion, the question arises as to why MoF chose this time to put a reduction into effect. Have implementation efforts faced specific challenges, or is it felt that financial inclusion is hitting saturation for Zambia?
The Mobile Trends graph indicates that since 2013, mobile money transaction value has continued to grow exponentially. The services continue to play an outsized role in actualising the NFIS objectives. According to the Bank of Zambia’s latest payment systems statistics, the value of mobile money transactions grew by 52.8% in 2023, reaching a new record high of K452.0 billion, up from K295.8 billion in 2022.
In her remarks during the NFIS II Launch, the UN Resident Coordinator in Zambia, Ms. Beatrice Mutali, indicated that despite strides in financial services such as mobile money, there are still underserved segments of the economy. She underscored the need to further deepen access to financial services like credit, insurance, and investments for inclusion to become a more meaningful metric.
Addressing the audience, Dr. Situmbeko Musokotwane, Zambia’s Minister of Finance, reiterated the NFIS II vision which envisages an inclusive and robust financial ecosystem that provides accessible, affordable and sustainable financial products and services to all segments of the population, which help increase their resilience, improve their financial health and build their confidence in the financial system.
“Let me state that we all need to work together for financial inclusion for all to be a reality in Zambia,” Dr. Situmbeko said. “I implore all to commit adequate resources towards the implementation of all the planned actions in the strategy.”
A robust but achievable financial inclusion growth target is essential for Zambia’s development, particularly amidst the Ministry of Finance’s unexpected reduction in key performance targets. Notable strides have been achieved in building a sustainable and financially inclusive Zambia, including the implementation of the Property Registry System (MPRS) and the establishment of a regulatory sandbox, to mention a few. Therefore, embracing greater financial inclusion is central to Zambia’s economic prosperity. The successful implementation of NFIS II requires collaboration from all stakeholders, promising a brighter future for Zambia that leverages the compounding power of integrating finance and technology.
