Making Access Possible (MAP) Mozambique

Mozambique is a country on the move. Since emerging from its long civil war in the 1990s, the country has liberalised its economy, initiated the construction of new infrastructure on a vast scale and instituted extensive public reform. The financial sector, in particular, has seen far reaching changes. Not only were several state-owned financial institutions privatised, but many new financial institutions have emerged. The economy responded with strong growth, averaging 7.5% in real terms between 2005 and 2014.

 

The United Nations Capital Development Fund (UNCDF), FinMark Trust and Cenfri partnered to undertake a Making Access to Financial Services Possible (MAP) diagnostic in Mozambique in 2013-14 to ask a simple question - to what extend has the liberalised fast growing economy and the rejuvenated and reformed financial sector succeeded in delivering financial services to the people of Mozambique. Put different, how inclusive is financial sector development in Mozambique?

The MAP Diagnostic report presents a comprehensive analysis of the financial inclusion environment in Mozambique. MAP will be used to inform the government’s approach to financial inclusion. In 2014, the Ministry of Finance formally requested FinMark Trust’s support for its ongoing financial inclusion agenda. The MAP study will form the basis for the development of a multi-stakeholder roadmap for financial inclusion, which in turn will be leveraged as a vehicle towards an integrated financial inclusion strategy in Mozambique.

Market Findings:  

 

Increase in banked population, but growth in financial inclusion reaching a ceiling. MAP found significant growth in financial inclusion since 2009. The figure below shows the banked population increased from 12% to 20%. However, MAP reveals two major challenges with the current growth of financial access. Firstly, Mozambique is close to reaching a ceiling of formal access beyond which it will be very difficult to grow. Secondly, the character of formal financial inclusion as it evolved in Mozambique delivers limited value to households and does not make the contribution to the country’s growth and development that it should.

 

Stark urban rural divide limiting expansion of formal financial services. Nearly two times as many urban adults as rural adults report using any kind of financial services, reaching as high as four times for financial services offered through banks. This is driven by structural divides been the urban and rural areas of Mozambique. Overcoming these divides will be a major challenge for financial inclusion. 

 

Informal services meet most of the population’s financial service needs. MAP revealed that of those adults that do have bank accounts, they are used meet only two needs – to send or receive remittances within the country or to receive a salary. Beyond these two needs, informal financial services are the primary mechanism for adults to live their financial lives.  

 

 MAP Moz blurb

Figure: Mozambique financial access strands

Source: FinScope Consumer survey, 2009, 2014

 

Going forward: Financial Inclusion Priorities

 

The long-term extension of financial access in Mozambique will closely track the long-term restructuring of the macro economy. As physical and digital infrastructure expands into rural areas, education is extended and the government succeeds in growing agriculture and economic sectors outside of the extractive industries, incomes beyond urban areas and megaprojects will start growing. This will increase the demand for financial services.

 

For the foreseeable future, financial access will thus remain hostage to the macro economy. This should not detract from the significant intermediate advances that can be made in the financial sector itself. However, some significant advances in financial access can be made, building on the momentum of the past five years. These related to the particular constraints on the financial sector, which if lifted, will make it easier and more cost effective for financial institutions to provide retail services across all product categories.

 

The financial inclusion priorities identified were:

  • Facilitate interoperability in the retail payment system
  • Allow banks to price for cash
  • Improve liquidity of formal providers
  • Reduce client barriers seated in regulation
  • Create sound regulatory frameworks for important product categories such as mobile money, cross-border remittances and microinsurance.

MAP Mozambique was a partnership between the DFID funded financial sector deepening trust (FSD Mozambique), FinMark Trust, Cenfri and UNCDF. 

Additional Info

  • Country: Mozambique
  • Institution: FinMark Trust, UNCDF
  • Date Published: 2015
  • Document Type: Diagnostics, Synthesis Documents
  • Author/s: Doubell Chamberlain, Hennie Bester, Bhairav Raja, Chris Endres, Neal Estey, Jaco Weideman, Zani Muller
 

Making Access Possible (MAP) Mozambique

Mozambique is a country on the move. Since emerging from its long civil war in the 1990s, the country has liberalised its economy, initiated the construction of new infrastructure on a vast scale and instituted extensive public reform. The financial sector, in particular, has seen far reaching changes. Not only were several state-owned financial institutions privatised, but many new financial institutions have emerged. The economy responded with strong growth, averaging 7.5% in real terms between 2005 and 2014.

 

The United Nations Capital Development Fund (UNCDF), FinMark Trust and Cenfri partnered to undertake a Making Access to Financial Services Possible (MAP) diagnostic in Mozambique in 2013-14 to ask a simple question - to what extend has the liberalised fast growing economy and the rejuvenated and reformed financial sector succeeded in delivering financial services to the people of Mozambique. Put different, how inclusive is financial sector development in Mozambique?

The MAP Diagnostic report presents a comprehensive analysis of the financial inclusion environment in Mozambique. MAP will be used to inform the government’s approach to financial inclusion. In 2014, the Ministry of Finance formally requested FinMark Trust’s support for its ongoing financial inclusion agenda. The MAP study will form the basis for the development of a multi-stakeholder roadmap for financial inclusion, which in turn will be leveraged as a vehicle towards an integrated financial inclusion strategy in Mozambique.

Market Findings:  

 

Increase in banked population, but growth in financial inclusion reaching a ceiling. MAP found significant growth in financial inclusion since 2009. The figure below shows the banked population increased from 12% to 20%. However, MAP reveals two major challenges with the current growth of financial access. Firstly, Mozambique is close to reaching a ceiling of formal access beyond which it will be very difficult to grow. Secondly, the character of formal financial inclusion as it evolved in Mozambique delivers limited value to households and does not make the contribution to the country’s growth and development that it should.

 

Stark urban rural divide limiting expansion of formal financial services. Nearly two times as many urban adults as rural adults report using any kind of financial services, reaching as high as four times for financial services offered through banks. This is driven by structural divides been the urban and rural areas of Mozambique. Overcoming these divides will be a major challenge for financial inclusion. 

 

Informal services meet most of the population’s financial service needs. MAP revealed that of those adults that do have bank accounts, they are used meet only two needs – to send or receive remittances within the country or to receive a salary. Beyond these two needs, informal financial services are the primary mechanism for adults to live their financial lives.  

 

 MAP Moz blurb

Figure: Mozambique financial access strands

Source: FinScope Consumer survey, 2009, 2014

 

Going forward: Financial Inclusion Priorities

 

The long-term extension of financial access in Mozambique will closely track the long-term restructuring of the macro economy. As physical and digital infrastructure expands into rural areas, education is extended and the government succeeds in growing agriculture and economic sectors outside of the extractive industries, incomes beyond urban areas and megaprojects will start growing. This will increase the demand for financial services.

 

For the foreseeable future, financial access will thus remain hostage to the macro economy. This should not detract from the significant intermediate advances that can be made in the financial sector itself. However, some significant advances in financial access can be made, building on the momentum of the past five years. These related to the particular constraints on the financial sector, which if lifted, will make it easier and more cost effective for financial institutions to provide retail services across all product categories.

 

The financial inclusion priorities identified were:

  • Facilitate interoperability in the retail payment system
  • Allow banks to price for cash
  • Improve liquidity of formal providers
  • Reduce client barriers seated in regulation
  • Create sound regulatory frameworks for important product categories such as mobile money, cross-border remittances and microinsurance.

MAP Mozambique was a partnership between the DFID funded financial sector deepening trust (FSD Mozambique), FinMark Trust, Cenfri and UNCDF. 

Additional Info

  • Country: Mozambique
  • Institution: FinMark Trust, UNCDF
  • Date Published: 2015
  • Document Type: Diagnostics, Synthesis Documents
  • Author/s: Doubell Chamberlain, Hennie Bester, Bhairav Raja, Chris Endres, Neal Estey, Jaco Weideman, Zani Muller