The provision of financial services to the economically underprivileged people in the Southern African Development Community (SADC) Region is far from being fully resolved, and the private sector can play a bigger role in advancing this agenda, Mr Khulekani Mathe, a Non-executive Director at the SADC Banking Association, has said.
Presenting a paper on the role of the private sector in advancing financial inclusion at the annual SADC Regional Financial Inclusion Forum held in Johannesburg, South Africa, on 12th and 13th October 2022, Mr Mathe noted that while financial inclusion is low in the Region, there has been significant improvements at the global level in recent years.
He said while progress has been made, the remaining challenges have also become pronounced. The COVID-19 pandemic and extreme weather events demonstrate how vulnerable people are to such shocks. Despite the challenges presented by COVID-19, innovation increased and banks implemented measures to limit the impact on their customers.
In the past few years, there has been significant growth in the number of financial technology firms (Fintechs) focusing on different aspects of financial services ranging from payments, cross-border remittances, and lending, particularly to small businesses. Moving money across borders in the Region has become less difficult although cost remains a huge factor in some jurisdictions, Mr Mathe said.
Presenting a paper titled “Review of the SADC Strategy on Financial Inclusion and SMEs’ Access to Finance”, Ms Nikki Kettles, Executive of Programmes at FinMark Trust, said the review of the SADC Strategy on Financial Inclusion and SMEs’ Access to Finance (2016 - 2021) was undertaken as part of the Support to Improving the Business Environment (SIBE), a four-year programme funded by the European Union to bring financial inclusion and economic inclusivity together.
The framework for review and recommendations involved the evaluation of the successes, failures, challenges and their causal factors on the implementation of the strategy to date; regional contextualisation in terms of economy, population and regional integration; review of the SADC financial inclusion institutional mechanisms; recommendations for regional integration of markets; and recommendation for the harmonisation of regulations and guidelines.
The objective of the strategy on Financial Inclusion is to improve access, uptake, and utilisation of quality financial services and products for consumers and SMEs for effective participation in the SADC Industrialisation Strategy and Roadmap.
The successes of the strategy include having 70% of adults in SADC accessing financial services, increasing from 57% in 2011; 30% of adults in SADC currently use mobile money services, compared to 23% in 2014; implementation of a regional cross-border payments switch, the SADC Real Time Gross Settlement, ‘RTGS’ system); and putting in place guidelines and model laws such as mobile money.
The SADC Protocol on Trade in Services is now in place, but several key challenges still limit the advancement of financial and economic inclusivity in the Region. There is a need to address the challenges of documentation or Know Your Customer (KYC) requirements which are a barrier. SMEs in the Region remain largely informal; and rural mobile network connectivity is limited, which is linked to the lack of availability of electricity.
However, progress has been made in regional integration. Intraregional exports as a share of total exports increased from 15.2% to 19.5% between 2008 and 2018. Cross-border remittance prices reduced to an average of ±13% from 17%. Regional rules on trade in agricultural products are in place, including the implementation of regional phytosanitary standards.
