By MAIMBOLWA MULIKELELA –
OVER the last decade, Zambia has enjoyed substantial economic growth but much of this growth has not benefited the rural poor, especially smallholder farmers who are mostly women and depend on farming to earn a living.
The agriculture sector accounts for around 22 per cent of the country’s Gross Domestic Product (GDP) and provides livelihood to more than 50 per cent of the population.
It is also the main source of income and employment for most Zambians and therefore investment in the sector remains cardinal.
However for agriculture to improve the lives of the smallholder farmers and have a deep social impact on the lives of the rural people, private sector organizations need to provide affordable and accessible savings, credit and insurance products that will support growth in the rural areas.
These services are essential to enable farmers increase productivity, incomes and ultimately grow the rural economies.
It is however important to point out that the majority of the rural households in Zambia remain financially excluded.
The Government through the Bank of Zambia (BoZ) has recognized the need to address the financial gap and as such it has formulated the Financial Sector Development Plan (FSDP) as a comprehensive strategy for addressing challenges in the Zambian financial sector.
Under this programme, access to finance by various stratum of society has been identified as a key challenge that needs to be addressed.
The BoZ has also been working tirelessly to create an enabling policy environment for private sector to provide innovative financial products with a view to getting the majority of Zambia’s population financially included so that they can have the means to enjoy the fruits of sustained economic growth.
The BoZ plans to increase financial inclusion to 50 per cent of the nation’s population by the end of 2015 from the 37 per cent of 2009.
Apart from these interventions, the private sector also recognises the need for an innovative approach to addressing the challenge of financial exclusion in Zambia.
The MasterCard Foundation is one such organization that has identified the need to promote innovation in financial services to improve the lives of one million financially excluded people in Africa including Zambia.
The MasterCard Foundation launched a US$50 million challenge fund to improve the lives of smallholder farmers in Africa by enabling businesses to begin or expand financial services in the rural areas of sub-Saharan Africa.
It is believed that more than 70 per cent of these families derive a large portion of their income from agricultural activities.
Many financial service providers lack the knowledge and capacity to develop appropriate products and services that can enable the rural poor and smallholder farmers to become financially included.
The MasterCard Foundation Fund for Rural Prosperity will be managed by KPMG International Advisory Services in Zambia.
The MasterCard Foundation is an independent global organization based in Canada and it has more than US$9 billion in assets.
Through collaboration with organisations in 49 countries, the Fund is creating opportunities for all people to learn and prosper.
The Foundation’s programmes promote financial inclusion and advance youth learning, mostly in Africa.
MasterCard Foundation president and chief executive officer Reeta Roy says the new fund will stimulate private sector organisations to provide affordable and accessible savings, credit and insurance products.
The Fund will support innovative ideas that have the potential to grow to scale and also have a deep social impact on the lives of rural people living in poverty throughout the sub-Saharan region.
About US$15 million has been set aside for the development of ideas for new products, services or processes that increase access to finances for the rural poor and about US$35 million will go towards
scaling up the most promising ideas or pilots that have the potential to drive financial inclusion for smallholder farmers in new geographical areas.
The MasterCard Foundation Fund for rural prosperity is operating in 24 countries among them, Zambia, Malawi, Burundi, Benin, Burkina Faso, Cameroon, Ivory Coast, Democratic Republic of Congo (DRC), Ethiopia and Ghana.
In light of this development, BoZ Governor Michael Gondwe said the Zambian economy has recorded robust economic growth rates for more than a decade now with GDP growth averaging 6.4 per cent in the last 10 years.
This growth has been broad-based extending beyond the mining sector to agriculture, manufacturing, construction, transport and financial intermediaries.
Dr Gondwe pointed out that financing to the agriculture sector, targeting small to medium scale farmers in the rural areas will provide food security, value addition and improved agricultural production.
The Fund for rural prosperity will enhance access to financial services by the rural population as a key for poverty reduction.
“This is most commendable indeed. As you may be aware, the Zambian government formulated the FSDP as a comprehensive strategy for addressing the challenges in the Zambian financial sector.
The Bank plans to increase financial inclusion to 50 per cent by the end of this year.
This entails expanding access to affordable and appropriate financial services, developing and implementing a national financial education strategy and continuing to undertake research to measure and improve the levels of access to financial services,” Dr Gondwe said.
Data available shows that financial services are however still largely focused in the more densely populated urban areas.
Dr Gondwe noted that more than 63 per cent of the population living in Zambia’s rural areas, the status quo simply means that many Zambians are outside financial inclusion.
The fund for rural prosperity would complement efforts to increase access to finance, in particular to the rural population with Dr Gondwe observing that embracing innovation such as this was cardinal
to creating possibilities and achieving increased access to financial services in Zambia and helping improve the welfare of many people.
Dr Gondwe was confident that more Zambians would be financially included and more smallholder farmers producing at sustainable levels, realizing sustainable developmental impact for themselves, their families and the economy.
The fund for rural prosperity which will be managed by KPMG International and initial applications for innovation proposals will be accepted from January 20, 2015 to March 20, 2015 for projects in 24 countries.
Later in the year, applicants will have the opportunity to submit proposals for scaling business ideas, products or services in eight countries namely Zambia, Mozambique, Senegal, Tanzania, Uganda, Ghana, Kenya and Ivory Coast.