Zambia Sample

Overview With the signing of the Maya Declaration in 2011, Zambia’s government has taken ambitious strides to boost its financial inclusion percentage from 37% to 50% by 2015. The efforts commit resources towards affordable and appropriate financial services in all 74 districts, and developing a national financial education strategy. Reaching the financial inclusion goal will require consistent and well-informed research to monitor and track progress; as their Maya Declaration concludes, “If you cannot measure it, you cannot plan for it, and therefore you cannot fix it.” There has been a strong positive result, as a close-knit development community working towards financial inclusion emerged, and key stakeholders across the industry collaborate effectively to push this constructive agenda. MIX had the opportunity to work closely with a range of local stakeholders, including representatives from the Bank of Zambia (BOZ), the Ministry of Finance, the Association of Microfinance Institutions of Zambia (AMIZ), FinMark Trust, and local Financial Service Providers (FSPs), to learn about their financial inclusion priorities and information needs. These local actors heavily informed our financial inclusion work in Zambia, uncovering their burning questions on financial inclusion and bringing together datasets that otherwise would exist only in isolation. This collaborative approach provided a robust view onto the Zambian financial landscape. A preliminary look into the financial inclusion data in Zambia reveals that financial access points are still largely focused in the more densely populated urban hubs. Looking at the All FSP layer of MIX’s Zambia Map of Financial Inclusion highlights this trend, showing financial inclusion at its lowest in the rural Muchinga and Luapula provinces.

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The large rural population often draws the largest concern from stakeholders in the development community, with over 8.3 million inhabitants living in rural areas. Given rising concerns of costs of delivery for financial access, identifying where new services will be most effective to reach these populations is important. Normally policy makers may be driven to the Eastern and Southern Provinces because of the large rural populations present there. However, our analysis shows that again Muchinga and Luapuala and the most underserved for rural populations.

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While generally the rural areas have low financial access, there is also a persistent lack of use for lower income populations in all parts of the country. In 2012, Bankable Frontiers found that most Zambians simply don’t see the benefit in switching from cash to retail payment services. The Poverty layer of our map attests to this trend, with the richest provinces still facing 58% of the population under the national poverty line. A common concern from local actors in Zambia was that financial products offered by mobile money operators or commercial banks simply do not fit the financial reality for the 60% of the population the lives on <$2.50 a day. Moving forward there is clear need to expand appropriate and responsible products, through effective delivery channels, to currently underserved segments of the population – both those living in rural areas, but also low-income individuals in urban areas. In our opinion three sectors offer the most promise for affecting Financial Inclusion: mobile money, Banking, and MFI’s. Mobile Money has already reached more clients than traditional retail orientated inclusion. Banking will continue to have the greatest influence on the regulatory environment, as they have the most to lose, and development MFI’s offer promise of client-centric products. Below is a discussion of the key findings for each. Mobile Money Similar to the lessons we learned from the Kenya and Rwanda maps of financial inclusion, mobile money has recently exceeded the reach of banks in terms of points of service.

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Airtel and MTN are the leaders, both aggressively adding new points of service through large partnerships - Airtel with Woolworth Zambia and MTN with Banc ABC. MIX was able to find data on the total number of mobile agents by provider, however, we were not able to access a breakdown of which agents actually provide cash-in/cash-out services. As a result, some mobile network operators appear with a larger footprint in the mobile money layer on the map, while a large percentage of these agents may only be providing airtime sales. This data does, however, provide a picture of what could potentially be the mobile money footprint in Zambia , particularly regarding usage figures Airtel for example, boasts over 1.2 million subscribers registered for its mobile money service, but according to Telecompaper only 15,000 of those are regular users of the service. Additionally, a complete listing of Airtel agents was not obtained, and more agents are suspected than represented on the map. A key, missing data point would be to track mobile transfers and usage. Banking Banking is largely focused towards the commercialized urban centers in Zambia. Over 60% of all commercial bank branches are located in the provinces of Lusaka and Copperbelt. From the mid 1990’s through the mid 2000’s Zambia witnessed many commercial and publically funded financial institutions flocked to urban strongholds, seeking increasing margins. This trend continues today with most branches located in the central corridor, even as the number of registered banks has increased greatly.

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Outside of traditional commercial banks, The National Savings and Credit Bank (NatSave), a government owned non bank financial institution, has been spearheading outreach to rural areas in recent years. NatSave was created with a social mandate to “deliver banking services to all parts of the country, especially the rural areas, at affordable prices”, and currently prides itself on having over half of its branches are in rural areas. Given commercial banks’ dominance in urban areas, and lack of sufficient viable alternatives currently in the rural areas, NatSave continues to play an important role in expanding financial access. Microfinance The microfinance industry in Zambia has been developing over the last fifteen years or so, but in terms of outreach to clients still plays a relatively small role in financial inclusion, with approximately 100,000 clients as of 2012. Today, there are two main types of microfinance institutions (MFIs): development MFIs and consumption-lending MFIs, sometimes called payday lenders. According to Dr. Bwalya N’gandu, Deputy Governor of Operations at BOZ, consumption lending accounts for 90% of the microfinance sector’s portfolio (as compared to 30% in the banking sector). The seven MFI’s focused on development have a greater presence in rural provinces, with a reach more proportionate to population size, and less focused on urban centers, whereas the consumption lending MFIs are more heavily concentrated in Lusaka and Copperbelt provinces.

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It will be important to monitor developments in the microfinance industry in Zambia following the adoption of interest rate caps early this year. Concern exists if rural branches will be shut down due to decreasing operational budget. Accordingly, Development MFI’s worry that mission drift will occur because a focus on the bottom line forces them to reach higher end clients. Next Steps A strong information base can help guide this process and monitor trends over time. MIX looks forward to continuing to provide local and global stakeholders in Zambia with the data visualization tools they need to support informed financial inclusion decision-making. Stay tuned for updates to the Zambia Map of Financial Inclusion as well as a continued flow of Financial Inclusion data visualization in Africa and Asia in the coming months.