The majority of Zambians are employed in the informal sector and have no access to banking facilities. Like everyone else, low-income families need affordable and convenient ways of managing the little money they have. While microfinance institutions have discovered that poor people generally make good borrowers, banks are struggling to figure out how to provide services for affordable savings to the poor.
It is not feasible for people in the remote rural areas to travel to the urban centres to deposit small amounts into a bank account. With banks currently unable to find cost-effective models to expand their physical reach into marginalised areas, and to handle large volumes of low-value cash transactions, the advent of mobile money services provides the potential to deliver the required level of proximity and low transaction costs, provided a favourable environment for cross-sector interoperability is created. There is a clear need for banks and MNOs to come together and find ways of delivering structured financial services to large numbers of unbanked households.
Providing services for savings to the majority low-income earners will not only have an impact on their lives, but on the national economy as well. According to media reports, the Bank of Zambia plans to partner with mobile phone operators to boost financial inclusion through mobile money services. Statistics indicate that mobile money accounts in Zambia currently stand at about 3.4 million compared to conventional bank accounts at 2 million. Rather than stashing cash in their homes, low-income earners in the informal sector and rural-based people could manage their cash flows more easily, safely and reliably with access to an affordable, convenient savings account.
For example, an informal trader or urban transport operator could safely keep their daily takings in an account, reducing the risk of loss or theft, and the temptation of diverting the money to other uses unrelated to the business. A farmer could use the account to conserve cash between the harvest season when they have plenty cash from crop sales, and the planting season when cash will be scarce to ensure they can buy inputs for the new season. A low-income family could use the account to build a fiscal buffer against a health emergency, for school fees or even against sudden loss of a job or other shocks that low-income families are often exposed to.
The advent of mobile money has certainly brought about several developmental gains for the ordinary people in sub-Saharan Africa, Zambia included. With over 80% of Zambia’s population employed in the informal sector and unable to access any form of social security scheme, the entrepreneurial innovation of mobile money and its flexibility to allow small transactions presents an opportunity for the pension funds and insurance industry to tap into the large majority of the population that is not covered by existing social security schemes.
Kenya, as expected, is leading the rest of Africa with new and exciting mobile money based products, and the Mbao Pension Plan scheme is a good example. This is a voluntary pension plan primarily designed to suit the informal sector, with the key innovation being that low-income earners can easily contribute small amounts into the fund using mobile phones as a medium. This is made possible by the accessibility of mobile phones and airtime to the general populace throughout the country, at affordable prices. Individual workers voluntarily choose the amount they are comfortable to contribute. The programme may still be in its early stages but offers promising innovations to extend social security coverage to marginalised workers.
The inaugural Mobile Markets and Financial Services Forum scheduled for Lusaka on 27 and 28 August 2015 will discuss these and other topical issues, providing a valuable educational and discussion forum for the mobile money and financial services sector and all stakeholders, giving updates on latest international developments in payment technologies, and latest trends in customer service delivery. The forum is expected to be addressed by senior government officials, regulators and authorities among other speaker from the private sector and other relevant organisations.
Download the brochure about it here: Mobile Markets and Financial Services Forum 2015.