Zambia Map of Financial Inclusion: National efforts tackle financial inclusion goals

Audrey Linthorst|Aug, 2013

Date: August, 2013

With the signing of the Maya Declaration in 2011, Zambia’s government formalized its commitment to financial inclusion. The Bank of Zambia (BOZ) pledged to work towards four key goals:

• Increasing financial inclusion from 37.3% to 50% (amongst the adult population) within 5 years;

• Ensuring access to affordable and appropriate financial services in all districts;

• Developing a national financial education strategy;

• Continuing to undertake research to measure and improve the levels of access to financial services.

The fourth goal, which focuses on consistent and robust information, is essential for the monitoring and tracking of the first two goals. As the declaration concludes, “If you cannot measure it, you cannot plan for it, and therefore you cannot fix it.” MIX’s Zambia Map of Financial Inclusion, the latest in a series of financial inclusion maps and sub-national financial inclusion geospatial data and analysis, brings together a series of supply and demand-level datasets that provide a robust view onto the current picture of financial inclusion in Zambia.

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 informed the focus and process of our financial inclusion work in Zambia, uncovering their burning questions and helping to identify existing datasets.

The Maya Declaration commitment, combined with a close-knit development community, has led to a strong collaboration aiming to increase financial inclusion. Working with this group has helped MIX to develop an effective and relevant tool to track progress towards their goals. MIX’s Zambia Map of Financial Inclusion and accompanying analytical tools provide the first geospatial view onto the status of financial inclusion. They provide viewers with the ability to understand the complex picture of access to financial services against a backdrop of different socio-economic variables including literacy rates, poverty levels, population density, and more. Updating this information over time will effectively enable the tracking of trends and measure progress towards Zambia’s financial inclusion targets.

Preliminary Findings
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.

The large rural population in Zambia raises concern from stakeholders in the development community, with over 8.3 million (of the total population of 13.0 million) inhabitants living in rural areas. The concern over the high costs of financial service delivery has led stakeholders to explore alternative means to reach these populations. While rural access remains a key focus in Eastern, Western and Southern Provinces, decision-makers are also concerned with addressing the financial needs of the low income urban population. As rural populations flock to urban hubs in search of income, meeting the evolving financial needs of this group becomes a growing challenge, both in provision and education.

The infrastructure layer on the Zambia Map of Financial Inclusion reinforces the challenge in reaching rural populations. The vast majority of bank branches are found along major roads and power lines. In order to reach its financial inclusion goals, Zambia will need to identify new ways, via partnerships, the expansion of mobile financial services, or retail networks, to extend beyond the limited infrastructure network in Zambia’s vast rural areas.

While generally the rural areas have low financial access, there is, more broadly, a persistent lack of use of financial services 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. This points towards financial education needs, as well as the need for more effective and relevant products to meet client needs.

Exploring FSPs:
To further explore current financial access levels, let’s explore a few FSP types that are key to increasing financial inclusion in Zambia:

Mobile Agents
Similar to what we saw in the Kenya and Rwanda maps of financial inclusion, mobile agents have recently exceeded the reach of banks in terms of points of service.

Airtel and MTN are the leading mobile network operators (MNOs), 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 large footprint in the Mobile Agents layer on the map, particularly in rural areas. Nevertheless, some of these agents may only be providing airtime sales. Despite this limitation, the mobile agent layer provides a picture of what could potentially be the mobile money footprint in Zambia, as it displays the current outreach of MNO agents.

Unfortunately, data on the uptake and use of financial services with these MNOs is not publically available. This will be essential information to obtain since viewing only subscription numbers can be misleading. 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.

A common concern from local actors in Zambia is that mobile money products simply do not fit the financial reality for the 60% of the population that lives on less than $2.50 a day. Mobile money has already reached more clients than traditional financial services. However, there are concerns about the relevance of their products, their inability to gain the trust of users, and a lack of consistent use of the financial products by subscribers.

Banking is largely focused on the commercialized urban centers in Zambia. By selecting the Commercial Banks FSP layer on the map, we can see that 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 flocking towards urban strongholds, seeking improved profit margins amidst a financial crisis. This trend continues today with most of the 19 commercial banks and 322 points of services located in the central corridor.

The National Savings and Credit Bank (NatSave), a government owned financial institution, has the widest brick and mortar outreach to rural areas. 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 the lack of sufficiently viable alternatives currently in the rural areas, NatSave continues to play an important role in expanding financial access.

The microfinance industry in Zambia 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 categorized as 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). Looking at the two MFI layers on the map, we see that the seven development MFIs have a greater presence in rural provinces, with their reach more evenly distributed throughout the country, and are less focused on urban centers. Consumption lending MFIs are more heavily concentrated in Lusaka and Copperbelt provinces, largely omitting the North-Western, Luapula and Northern provinces.

There is concern that the adoption of interest rate caps earlier this year will impact the ability of MFIs to maintain branches in rural areas. Another major concern is that widespread mission drift will occur as a focus on the bottom line leads MFIs to reach towards higher end clients. Over the coming years, MIX will update branch data in rural areas through the Zambia map and other data visualization tools to assist decision makers as they track the impact of the interest rate caps.

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.

In the meantime, please share your thoughts with us. What did you find useful about the Zambia Map of Financial Inclusion? What surprised you? What else might you like to see to help complete the story of financial inclusion in Zambia? Let us know by sharing your comments below!