According to SaveNet data, at the end of 2018, there were 15,700 savings groups in Zambia, with cumulative savings amounting to K53.1 million
With education being known as the exit path to poverty, it is hard for those who are already in poverty to find a gateway that will guarantee them that much-needed exit to breakthrough in life.
And for those who already have a means to access that exit path, issues of school fees and requirements become a major headache when January arrives.
Most people, whether in the rural or urban setting of the country, have challenges in this area because of the perceived poor savings culture in the country.
Following the launch of the National Financial Inclusion Strategy in 2017, new informal financial service providers have emerged, such as village banks and savings groups in both the rural and urban areas.
Among others, the Financial Sector Deepening Zambia (FSDZ), in partnership with the Catholic Relief Services (CRS), is implementing the Financial Inclusion of Women and Youth (WIN) project that is biased towards saving for education.
As both formal and informal financial service providers are agents of financial inclusion, it is important for regulators to seek effective ways of linking the two types of players with a view to reducing informality as they seek to expand financial inclusion.
But according to Kennedy Mulenga Chomba, chairman of the Mapalo Savings Group in Kasama, it is difficult for rural dwellers to save through the formal banking sector taking into account the long distances they had to travel and the processes they have to go through when opening an account.
With four children to support in school, Chomba greatly benefited from the WIN project, as he is also saving in preparation for his daughter who is writing her grade seven exam so that he is ready for her school when she proceeded to grade eight.
With a small general dealing business to his name, he managed to save about K2,000 for the first and second terms of this year through his meagre earnings, which he would originally spend before joining the savings group.
“Icha lenga fye sana sana, efyo tuya muku pitamo ku bank fila fula, leteni fya kuti, chiteni shani, elo bambi ta ba ishiba uku lemba, nomba ku bank ku fyaikwa umuntu uwishibe ko uku lemba. Ifi paper ba pela uku signer shani, uwu shaishiba ukulemba, teti akwanishe (What causes us to avoid saving money with banks mainly is the procedures we have go through when opening accounts; they ask you to fill in that form or sign that one and that is not possible for most people as they do not know how to read and write),” Chomba bemoaned.
And Lavender Musonda from Chiba area in Kasama complained about the high bank charges that accrued from saving funds in the bank, hence opting for the use of the savings group to save up for the four school-going children she has.
“When January comes, we no longer stress about what we are going to pay (in terms of fees and requirements); we just go and save with the group, specifically, for school-going children. We just set targets, according to individual needs and ensure that we meet them. If we fail to meet, this is when we do get loans from the group with a 10 per cent interest charge, which is later shared among the group members,” said Musonda, expressing delight, as she narrated how she had benefited from the savings for education project.
Financial Sector Deepening Zambia (FSDZ) were currently working with MTN Mobile Money to find a way to digitize the savings groups and do away with bank protocols, according to FSDZ communications manager Eneya Phiri.
“What we are working to do, going forward, is to ensure that we can systemize this digitization of school fees payments. Imagine how much they will be saving in terms of transport costs when they are able to transact via their mobile phones and pay school fees via their phones? Imagine how much resources we are opening up? You have also noted that there is a strong component of financial literacy throughout these interventions. You will realize that there is a big connection between financial literacy and economic development in any country and one of the big things we are doing is financial education to increase the literacy of segments that are in the under-served, because they have to have the right knowledge to make the right decisions concerning their finances,” Phiri said.
“You have, for example, that women are saving as little as K5 and they have to spend K25 for transport just to go to town and spend school fees. So, that tells you that once we expedite the savings groups, and once we look at digitizing school fees payments, we will be reducing a significant amount of costs enabling them to save more; enabling them to have access to finances for different issues they can be facing at household-level, including education, access to healthcare and saving for a better livelihood.”
And to finally digitize the savings groups, FSDZ is currently piloting a project in Kabwe to digitize saving groups and later roll it out across the country.
“So, normally, we work with our innovations; we have got a model called the Fin Client Centric model. What this does is, we go down to the ground; we find what the problem is and, then, we design products with different financial fintech and we say ‘can this work?’ So, the digitization is one of those products. Right now, as I am speaking, we are piloting this, we are testing it in Kabwe with youth, Digital Financial Savings Groups with youth, and we want to see how it works; we want to see what benefits and the challenges are and once we look at that, once we iron out the clinks, then we can roll it out to different communities and, finally, nationwide. In terms of timeline, we have got a six month-period from the time that we began to look at it; so we are looking at towards mid-2020, we should be having some results from the initial phase of the project and then beyond that, scale it up to other areas where we are working and potentially through the system,” said Phiri.
But from a wider perspective, Bank of Zambia governor Dr Denny Kalyalya during this year’s World Savings Day did allude to the fact that digital platforms were the way to go if financial inclusion is to be attained in the country.
“Following the launch of the National Financial Inclusion Strategy in 2017, new informal financial service providers have emerged, such as village banks and savings groups in both the rural and urban areas. As both formal and informal financial service providers are agents of financial inclusion, it is important for us, the regulators, to seek effective ways of linking the two types of players with a view to reducing informality as we expand financial inclusion. Distinguished guests, in recognition of the importance of formal financial inclusion in supporting economic growth, the Bank of Zambia is collaborating with SaveNet, to develop channels to link informal savings groups to formal financial services providers. According to SaveNet data, at the end of 2018, there were 15,700 savings groups in Zambia, with cumulative savings amounting to K53.1 million,” said Dr Kalyalya.
“This points to a good opportunity for the formal financial service providers to mobilize deposits. In this regard, it has been observed that a number of regulated financial service providers and mobile money operators have already started designing products aimed at tapping into this market. It is hoped that this move will expedite the transition of informal groupings into the formal financial sector and enable more people gain access to a wider range of quality and affordable financial services. I want to stress here, as one of our colleagues noted last year’s commemoration that, financial service providers have to provide the products and services that the people want and not what providers think they want.”
When all is said and done, it is good that the target communities are greatly benefiting, but the onus remains on government to ensure that they don’t leave the mammoth task of enhancing financial inclusion to civil society alone, but must take the leading role in ensuring that financial inclusion is achieved in Zambia and poverty is reduced in line with the Vision 2030 agenda.