Sustainable Financial Inclusion and Linkages Project Summary

Zambia has made improvements over the years in terms of financial services delivery outlets/channels offered by both the formal and informal financial institutions. Despite that, the level of adults Zambians above 18 years who are excluded from financial services remains significant. The comparison between the baseline survey 2019 and end line survey conducted in 2020 by RFDP Zambia in Lundazi, showed improvement on the number of the financially excluded adult population, The results of the survey of financial outlets in Lundazi  indicates that while the urban areas are well covered in terms of financial services outlets, the rural areas have a long way to go even after taking into consideration the VSLAs and mobile money outlets such as Zanaco express, airtel, MTN and Zamtel.

Based on the assertion above, financial exclusion is still prevalent in Zambia and in Solwezi, Kalumbila and Mushindamo districts of the North-western province of Zambia in particular. According to the end line survey conducted by RFDP Zambia in Lundazi district, Eastern province of Zambia, 29% of the local population in Lundazi were financially excluded, 33% of the respondents did not have access to mobile phones which is a prerequisite for digital banking platform (RFDP Zambia End Line Report, 2020) and all these people were from the rural areas.  According to the Fin Scope survey of 2014, 63% of the total population in Zambia was financially excluded. In rural areas, women had higher rates of financial exclusion. 66% of women were excluded from financial services compared to 59% of men. Rural areas had levels of exclusion also at 66% compared to 58% in urban areas (New Faces, New Voices, 2014).

The situation is not different with the women in the target districts of Solwezi, Mushindamo and Kalumbila rural communities. These Women face significant barriers to maintaining and expanding their businesses due to inaccessibility of formal financial services, limited access to capital, and lack of technical skills. There are few FSP providers who provide financial services to the people of North-western province. Most of the VSLAs in the target districts are still using the traditional way of accessing financial services through the group lending and savings using a box to save the money rather than using the modern way of lending and saving through digital banking platform where the savings are made through the phones and savings are kept digitally on phones. There are no organisations who are promoting financial services linkages programme in the province, and this makes the population to continue being financially excluded from accessing financial services.  FSP are found mostly along the line of rail or in the central business areas. Remote rural outlying areas in Solwezi, Mushindamo and Kalumbila districts lack such facilities that can provide financial services to the women. Women from far rural settings are exposed to walking long distances into town to access these financial services where they are available. Poor women have long been a risky group for giving such loans by the banks. This has made poor people in the remote district not to have access to financial services.

It is for this reason that RFDP Zambia has partnered with Rural Finance Expansion Programme RUFEP to implement the Sustainable Financial Inclusion and Linkages Project to tackle both the supply side and demand side bottlenecks to financial inclusion. The project will explore and promote increased financial services delivery channels and linkages between RFDP Zambia‘s CBFIs in the target districts and MFinance including providing an enabling environment for the creation of MFinance Agent Banking model. The approach adopted by RFDP is the Village Savings and Loans Association (VSLA) model using digital banking platform. Through this model, rural women in Solwezi, Mushindamo and Kalumbila districts will be able to develop their own structures to facilitate digital savings and lending and improve access to financial services and increase incomes, where the savings in turn will be accessed as loans by affected savers through digital banking platform.

The project aims to significantly reduce poverty levels amongst 3,000 poor, rural women in Solwezi, Mushindamo and Kalumbila districts, in Northwestern Province, Zambia. The purpose of Sustainable Financial Inclusion and Linkages Project (SuFILP) is to increase household incomes and improve livelihood strategies of the targeted beneficiaries. This will be done through promoting sustainable linkages between RFDP’s Village Savings and Loans Association (VSLAs) or CBFIs with Madison Finance to improve access to financial services and diversification of income opportunities, enabling rural households to have greater economic security and reduced vulnerability to shocks and stresses. The project will support four key outputs: Promote linkages between RFDP’s CBFIs with Madison Finance, improved basic business skills, increased access, and usage of financial services by low-income rural women, and improved financial capability of women who own Micro and Small enterprises (MSEs).

RFDP through this project will promote this transformative approach to reduce poverty  and  increase  income  by  partnering  and  creating linkages  with Madison Finance  to  make  financial services  more  accessible  and affordable for the poor through digital banking platform. The operation of the platform allows the client to check balance, buy electricity, pay TV, and buy airtime as well as data for internet. The other features on this platform allows a client to withdraw or send money from 543 Konse Konse using Kazang point of sale machine with a maximum amount of K 2,000 per transaction. The client can send money using operation 7 above with the three options - internal Transfers, mobile wallet, and group to members transfer which is very suitable for VSLAs. The platform also can be used to purchase vouchers from Airtel, Zamtel, MTN, liquid telecom, Topstar, DSTV, GOTV and MLife.

The project will strengthen 150 VSLAs, with total membership of 3,000 women and men. VSLAs will mobilize regular, modest savings and then manage small loans digitally amongst themselves. After the VSLAs have been strengthened in financial literacy, savings mobilisation, and loans procedures within the VSLA, they will be linked to Madison Finance for further training in linkages processes and external loan and savings procedures and products. The project will directly target 3,000 men and women in Solwezi, Mushindamo and Kalumbila Districts, with a family multiplier of 6 people per household (for Zambia) 18,000 people will be reached. The target districts were chosen through a snapshot assessment which was carried by our volunteer staff based in Solwezi.

Potential Impacts of the Project

  1. Promote economic mobility and financial stability for women and their families, increase incomes from the economic activities pursued, as will be identified from the baseline survey, increase awareness through financial literacy and linkages leading to increased savings and ability to manage money, providee greater economic security and reduced vulnerability to shocks and stresses,
  2. Increased incomes through increased share values in the VSLA groups especially the linked groups because of being sure of security of their funds at group and individual level, M-Savers accounts will be promoted amongst project beneficiaries, which is a value addition to people who never dreamed of having a bank account and this account comes with features such as buying mobile phone airtime, buying of solar tokens and those with DSTV will be able to subscribe.  The other benefit that comes with individual accounts is that members are able to transfer their loan repayments to a group account. The digital platform also comes with ultimate benefits during this COVID era where handling cash is not encouraged to avoid the spread of the pandemic. The other impact is that small and medium scale actors (individuals and groups) that save with and acquire loans from MFI and VSLAs for agricultural and agribusiness purposes will increase,
  3. Increased access and usage of financial services for at least 90% of the target beneficiaries, 30% increase in assets or savings among participating households by end of project and the financial inclusion of women will improve the Zambian economy. Increasing financial inclusion is proven to “have a direct positive effect on economic development” (Bank of Zambia, 2016).

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