There is growing evidence that financial inclusion has substantial benefits for the excluded population especially for women and impoverished adults in many countries.
Policy makers have embraced financial inclusion as the key to economic empowerment and a solution to rising poverty levels. Similarly, in Botswana the Ministry of Finance and Economic Development and industry stakeholders are working in unison to address and improve financial inclusions ratings.
Although the United Nations Educational, Scientific and Cultural Organisation Institute for Statistics places Botswana at 86.2 percent literacy rate (Unesco, 2019) our financial inclusion ratings are still lagging behind. As already alluded to in the previous article, in 2014, only 50 percent of Batswana were banked and the current results indicate an increase of 6 percent to 56 percent. The uptake of other formal non-bank financial products has also increased by 20 percent in 2014 to 76 percent in 2020. With regard to informal financial products, the update has also increased by 3 percent from 39 percent to 42 percent.
Unfortunately, the COVID-19 pandemic and its containment measures are likely to cause an economic contraction of about 2.8 percent in Sub-Saharan Africa. Among the many adverse effects in the global economy, the crisis is posing a deep threat to financial inclusion efforts globally. The lockdowns and curfews designed to curb the spread of the virus resulted in the closure of bank branches and halted operations throughout the financial services industry. Operations of mobile money agents were halted and other industry players such as Insurance houses and Asset Managers were grossly affected by the restrictions. Government officials and health practitioners encouraged the use of cashless and contactless modes of payment to reduce the risk of spreading the virus through the handling of cash.
Several publications and research indicate that although there is generally a gap to close across the globe, the sub-Saharan region seem to be the most affected with very low financial inclusions ratings. The World Bank Group announced an ambitious global goal to reach universal financial access (UFA) by 2020 at the 2015 Spring Meetings of the World Bank Group and the International Monetary Fund (IMF). The World Bank Group is specifically committed to the goal of enabling 1 billion people to gain access to a transaction account through targeted interventions by 2020, and to integrating financial inclusion into the Financial Sector Assessment Programs (conducted jointly with IMF). The Bank Group recognizes financial inclusion as a key enabler to reduce extreme poverty and boost shared prosperity. Due to this we have seen efforts by a number of countries to change the narrative.
Source: GSMA Intelligence
In the United States of America, although there are government policy initiatives in place for reducing financial exclusion, it is treated as an individual problem and one has to take it upon themselves to be part of the bigger financial network. In the United Kingdom, financial institutions have teamed up as key industry participants and devised initiatives to minimise levels of financial inclusions. In comparison to Botswana, where both the Government is directly involved and industry players are active, one can conclude that Botswana is even poised to achieve better results. Moreover, both the UK and US are advanced in embracing the mobile payment ecosystem as well as cashless transactions and thus assisting individuals in both regions to gain access to a broader range of financial services at a lower cost. In Europe, the focus is different, financial inclusion is achieved primarily by granting access to credit markets in order to increase the number of borrowers and ensuring the stability of credit markets. In the East Asia Pacific and with special interest on China which has a very high level of financial inclusion, there is a greater use of accounts and formal savings. China also witnessed an explosive growth of Fintech products and services through an increased demand for web -based services.
The Chinese government is fully behind the initiative and has a robust plan to encourage technologies in order to promote financial inclusion and social stability.
Although the Middle East and North Africa regions are slightly ahead of the Sub- Saharan region, there is also some work to be done in order to address financial exclusion. According to research evidence, there is physical access to financial service in Islamic countries but the use did not take up as expected. The need for a legal, regulatory and supervisory framework that enables access to finance primarily through banks, providing regulatory space for the use of agents and mobile phone technology, finance company model for microcredit and leasing, promotion of prudent competition between financial services providers and removal of barriers to the growth of Islamic financial services to meet market demands are some of the areas to be addressed in order to lower levels of financial exclusion. Given the fact that we have seen different countries adopt different approaches to addressing the problem of financial exclusion, Botswana as a country can interrogate various options at our disposal and adopt initiatives that are well suited to our country specific problems in order to derive the most desired results.
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