Seeking out the banking sector�s lost sheep
Mbongeni Mguni | Friday May 8, 2015 12:55
The results of the inaugural Global Findex Database, caused consternation in the local financial services arena, when they were first released in 2012, indicating that only 30 percent of adults in Botswana held bank accounts. The World Bank global study looked at how countries save, borrow, make payments and manage risk. Researchers randomly sampled 150,000 interviewees worldwide, aged 15 years and above, to gauge the level of financial inclusion which refers to the delivery of financial services at affordable costs. According to the World Bank, financial inclusion is critical in reducing poverty and achieving inclusive economic growth.
“Greater access to financial services for both individuals and firms may help reduce income inequality and accelerate economic growth,” the Bank says.
“Studies show that when people participate in the financial system, they are better able to start and expand businesses, invest in education, manage risk, and absorb financial shocks.
“Access to accounts and to savings and payment mechanisms increases savings, empowers women, and boosts productive investment and consumption.”
For Botswana, inclusive growth and the narrowing of income inequality are recently adopted priorities expected to guide future budgets, beginning from the current financial year. From 30 percent cover, the latest Findex report indicates that 52 percent of all adults in Botswana have access to a bank account, significantly above the sub-Saharan average of 32 percent, but below the global standard of 62 percent. In southern Africa, Botswana is second only to South Africa which has 70 percent of its adults banked. Other neighbours such as Namibia, Zimbabwe, Zambia, Malawi have inferior figures ranging from 59 percent to 18 percent respectively.
The world’s most “banked” countries include Finland, Denmark and New Zealand, where 100 percent of adults have bank accounts. According to researchers, the leap in financial inclusion in Botswana has been helped by the spread of mobile money services, such as MyZaka and Orange Money, which have provided the previously unbanked with flexible access, as providers have leveraged on high mobile density rates in the local market.
MyZaka and Orange Money were launched within weeks of each other in June 2011 and subsequently grew to 161, 200 subscriptions in the first full year of availability – 2012. In 2013 – the last period for which official data is available – MyZaka and Orange Money subscriptions rose to a staggering 248,000, representing nearly an eighth of the population. “There has been rapid growth in offerings of mobile money accounts around the world in the past three years,”
Findex researchers said. “In sub-Saharan Africa, almost a third of account holders — or 12 percent of all adults — reported having a mobile money account.” Across Africa, the growth of mobile money is linked to higher financial inclusion, although in many cases, researchers found that consumers only had the mobile money account and no other. Botswana, the study shows, was the exception.
“In Tanzania, where account penetration doubled to 40 percent in 2014, the growth was driven entirely by people adding a mobile money account only,” researchers said.
“In Botswana and South Africa, by contrast, the growth was due almost entirely to people adding both types of accounts.”
Of the adults with banking access in Botswana, the Findex study found that the majority of account holders were with formal “brick and mortar” banks, with very few only holding mobile money accounts to the exclusion of the formal type. Bank of Botswana figures suggest that the expansion of the traditional “brick and mortar” networks as well as digitalisation in more recent years have largely underpinned the growth in the banked population.
According to central bank figures, total commercial bank branches and sub-branches grew from 97 at the time of the inaugural Findex to 115 in 2013. Automated Teller Machines also increased from 357 to 390 over the same period. Digitalisation, however, has been different. Beginning in 2011 with First National Bank Botswana, the local commercial banking sector began moving away from traditional branch banking to digital channels such as cellphone and internet banking. Apart from attendant staff rationalisations, digitalisation, many sources agree, has largely been a win-win for Botswana as it has enhanced financial inclusion, provided incentive to expand for telecommunications operators and richly rewarded banks in fees. Experts believe the prevailing tighter liquidity will force local banks to focus on the remaining “unbanked” 48 percent as an opportunity to move funds into formal banking and reignite effective financial intermediation.