Caleb M Fundanga: Improving financial inclusion in Zambia
Remarks by Dr Caleb M Fundanga, Governor of the Bank of Zambia, at the Celpay Mobile
Banking Conference, Lusaka, 16-17 September 2009.
* * *
The Chairman of the Board, Celpay Zambia, Dr Jacob Mwanza;
The Chief executive Officer, Celpay International, Mr L. Muchenje;
Chief Executive Officers and Representatives of Banks and Financial Institutions present;
Distinguished Invited Guests and Resource Persons;
Members of the Press;
Ladies and Gentlemen
I wish to express my gratitude to Celpay Zambia Limited and in particular to Dr Jacob
Mwanza, the Chairman of the Board, for inviting me to speak at this important conference. I
am informed that the conference aims to pave the way for the future of mobile banking in the
quest to improve financial inclusion in our country.
Mr Chairman, the need to promote wider access to financial services through innovative
products by financial institutions and other market players cannot be overemphasized.
Financial services are a critical tool to ensure that entrepreneurs step onto the economic
growth ladder and create a brighter future by tapping their own creativity in income
generating activities. The provision of financial services to the majority of our people
especially the small and micro entrepreneurs who are financially excluded is a key element in
alleviating poverty in the country. Improved access to financial services enables availability of
funds for investment in income generating activities that ensure that the public lay a
foundation for better standards of living. Indeed financial services are instrumental for
broader human development, as people invest in themselves and seek protection from
external shocks.
Distinguished Ladies and Gentlemen, as you are no doubt aware, the results arising from the
2005 FinScope demand side study which aimed at measuring access, usage, perceptions
and the demand patterns on financial services offered in Zambia were not encouraging. The
findings of the study indicated that only 33.7% of the adult population was financially served.
This entailed that 66.3% of the Zambian population were financially excluded or not using
banks or other financial institutions. Furthermore, the supply side study conducted in 2007
also highlighted a number of weaknesses in the financial sector including, limited outreach of
banks and financial institutions to the general populace, high spreads between deposit and
lending rates, excessive collateral requirements and poorly managed cost structures which
contribute to limiting outreach.
As a consequence of the low levels of access to financial services, the Bank of Zambia
adopted financial inclusiveness as one of its strategic objectives to ensure improved levels of
access for all. In this regard, it is gratifying to note that following the survey, commercial
banks and other non-bank financial institutions including Celpay have increasingly become
receptive to the calls for increased provision of financial services. A number of banks and
financial services providers have increased their branch networks, lending to small and
medium-sized enterprises have been increased while financial products specifically designed
to meet the financing needs of the lower end of the market in both rural and peri-urban areas
have been introduced. One such product that banks and other institutions in the
telecommunication sector have strived to promote in order to increase inclusion is mobile
banking.
As you are no doubt aware, Distinguished Ladies and Gentlemen, mobile banking represents
a significantly cheaper alternative to conventional branch based banking as it allows financial
institutions and other commercial players to offer financial services outside the traditional
brick and mortar bank concept. Mobile banking uses channels such as retail agents and
mobile phones to increase financial outreach to the un-banked communities. Mobile banking
has revolutionalised banking worldwide and I am glad to note that Zambia is playing a
leading role in the development of the mobile banking industry in the SADC region. As you
may be aware, there are three operational mobile payments companies that have
successfully penetrated the market in the past seven years. While a number of banks now
offer mobile banking solutions.
The British Broadcasting Corporation (BBC) website recently carried an article wherein, it
was acknowledged that Africa has the fastest growing mobile banking market in the world.
The significance of the article was not only the growth of the industry but the
acknowledgement that most of the operators are local companies. However, in
acknowledging this growth and the important contribution of mobile banking to extending
financial services to the poor, consumer protection should be taken as an integral component
of any business model that is developed. To this end, the Bank of Zambia working with other
key stakeholders such as the Communications Authority will play its role in ensuring that the
provision of an enabling regulatory environment is carefully balanced with the need to protect
consumers.
Mr. Chairman, the Celpay conference on mobile banking could not have come at a more
opportune time when the country is facing numerous challenges arising from the impact of
the recent financial and economic crisis. Due to the underperformance of various sectors of
the economy during the period of the crisis, provision of financial services was somehow
curtailed while non-performing loans has been on the rise. In order to ameliorate the effects
of this downturn and further improve financial inclusion, it is imperative to develop cost
effective innovative products such as mobile banking. It is therefore expected that this
conference will come up with solutions that will enhance the extension of banking services to
the poor and at affordable rates.
Ladies and Gentlemen, recent statistics on telecommunications indicate that there are about
three million subscribers across the three mobile networks currently licensed to operate in
Zambia. This extensive coverage obviously offers a great opportunity to enhance the
standards of living of our people. As we embrace mobile banking, the primary objective of
Zambia's mobile banking framework should be to empower the millions of citizens who do
not have access to conventional banking. The essential spirit of mobile banking should be
financial inclusion. In this regard, facilitating mobile banking will contribute to the distribution
of resources to productive activities such as farming as well as directing resources to areas
where there are most needed. In addition the policy framework should be flexible enough to
allow the industry players to explore various business models.
To this end the National Payment Systems Act of 2007 has provided a platform for
businesses involved in mobile banking and money transmission to be designated. The need
for effective regulation to ensure a stable financial sector and protection of consumers is
vital. Nevertheless, regulation should facilitate and not impede development and must create
an optimal, dynamic and agile banking environment. As Regulators we must therefore be
open minded to new market solutions while the developers need to constantly engage the
regulator in their product development. In stressing the need for effective regulation, I must
emphasise the need for providers to observe the mandate and requirements of their licences.
Mobile services providers must not perform banking services as this is the domain of
licensed banks.
Finally, I also wish to stress that mobile service providers and mobile banking solutions
developers need to have in place robust business continuity plans that will ensure minimum
disruption to services in the event of disasters. It is not unusual for one to be turned away at
customers counters on account of the lack of basic facilities due to for instance power failure
or link failure when these can be mitigated where there are proper contingency plans in
place. The Bank of Zambia will therefore ensure that sound business continuity plans are in
place when evaluating new applications.
Ladies and Gentlemen, as we develop these well meaning products, I wish to appeal to the
service providers to ensure that investment in such infrastructure is complemented by
investment in financial literacy. We need to ensure that we are providing individuals and
communities with the level of financial education needed to grasp both the benefits and
pitfalls of their easier access to financial services. This will in part minimize the risks
associated with such innovative products as people will only make better judgments about
their financial affairs if they understand the risks and returns associated with the product and
services at their disposal. It is also apparent that financial illiteracy is more costly as people
who make poor financial decisions will inevitably end up with a far lower standard of living
than was otherwise achievable.
Mr. Chairman, I wish to conclude by applauding Celpay's initiative to host the first ever
mobile conference in Zambia. The deliberations and recommendations of this conference will
be keenly followed as the need to leverage access to financial services through the mobile
phone is of paramount importance. Mobile banking will lead to increased outreach, increased
efficiency and productivity as well as increased returns for businesses. Let me once again
assure you, Mr. Chairman that, the Bank of Zambia is committed to providing an enabling
environment through appropriate regulation for banks and financial businesses that wish to
promote financial inclusion. We appreciate the Mobile Banking initiative by Celpay Zambia
Limited and look forward to greater investment in financial inclusion in our beloved country.
I thank you.