Financial Inclusion in SADC Region
The SADC Treaty is the basis for a range of efforts to bring about
sustainable, collaborative development in several important areas –
including financial services – with the goal of poverty eradication.
Additional Opportunities in SADC (and impacts as a result):
- An opportunity to increase financial inclusion
- An opportunity to decrease the costs of cross-border payments
In 1992, Member States signed the SADC Treaty committing the regional
group to work together to:
- Achieve development and economic growth,
- alleviate poverty,
- enhance the standard and quality of life of the people of Southern Africa, and
- support the socially disadvantaged through Regional Integration
The SADC Council of Ministers in September 2016 approved the SADC
Strategy on Financial Inclusion and SME Access to Finance as a means to
accelerate financial inclusion programmes in all SADC Member States.
The basic elements of financial inclusion can be summarised as a state in
which individuals and businesses have access to a range of financial
institutions and products, in a stable competitive market, in a convenient
and accessible manner.
This would ensure that all sectors of the economy and its entire
population are able to have access and can effectively use appropriate
financial services to meet their needs.
SADC Financial Inclusion Seven Guiding Principles
Commitment from public and private sector organisations to broaden
financial inclusion is explicit, strong and sustained over time
The Legal and regulatory framework underpins financial inclusion by
effectively addressing all relevant risks and by protecting consumers,
while at the same time fostering innovation and competition.
Robust, safe. efficient and widely reachable financial ICT
infrastructures are effective for the provision of transactional account
services, and also support the provision of broader financial services.
Transaction account and payment product design. The transaction
account and payment product offerings effectively meet a broad range
of transaction needs of the target population, at little or no cost.
Readily available access points. The usefulness of transaction
accounts is augmented with a broad network of access points that also
achieves wide geographical coverage, and by offering a variety of
interoperable access channels.
Financial Literacy – Individuals gain knowledge, through financial
literacy efforts, of the benefits of adopting transaction accounts, how
to use those accounts effectively for payment and store-of-value
purposes, and how to access other financial services.
Large volume, recurrent payment streams. Large volume and recurrent
payment streams, including remittances, are leveraged to advance
financial inclusion objectives, namely by increasing the number of
transaction accounts and stimulating the frequent usage of these
Financial inclusion refers to the delivery of financial services and
products in a way that is available, accessible and affordable to all
segments of society and plays a pivotal role in combatting poverty and
contributing to inclusive economic growth. The three main dimensions of
financial inclusion are:
- Access: the combination of both the availability and appropriateness of financial products and services;
- Usage: the frequency of interaction with the product or service; and
- Quality: the combination of product fit, value add, convenience and risk.
In addition to the aforementioned dimensions, exclusion can also be
voluntary or involuntary and activities to drive inclusion should focus on
involuntary exclusion, which results from low incomes and high-risk
profiles of the un served and underserved segments of society.
Financial products and services for those who are in some way included,
can be provided in the formal or informal arena, which not only influences
access and affordability, but also predictability or product performance,
consumer protection and effectiveness. The adult population and
businesses accessing financial services and products can be segmented
into three main categories:
- The “Banked” population refers to individuals and businesses who have/use services provided by an institution operating under a banking license which is regulated by the regulatory authority of the country.
- Other formal (non-bank) refers to individuals and businesses who are served by other regulated financial institutions. These adults have/use financial products and/or services provided by regulated non-bank financial institutions such as micro-finance banks/ institutions insurance companies, retail, remittances service providers, and credit providers.
The “Underbanked” population refers to individuals and businesses
who have needs for multiple products, but only have access or use a
select subset of them.
The informally served refers to the adult population who do not make
use of financial products provided by regulated financial institutions.
This segment of the population do not have/use any financial products
and/or services from regulated financial institutions. In many African
countries the informal financial sector is largely driven by remittances,
savings groups and credit associations.
Whether through formal, or informal channels, financial inclusion
encompasses four main product categories:
- Transaction enable people and businesses to buy goods and services, and send money to friends, family and business partners. They also enable government to collect taxes and disburse social payments;
- Savings and investments offer a safe place to save and build assets for future expenditures such as education and agricultural inputs. Savings products also allow families, individuals, and businesses to smoothen their consumption;
- Credit provides access to capital and enables people and businesses to seize new business opportunities or expand existing operations, and increase consumption in times of need; and
- Insurance enables people and businesses to manage risk and protect themselves from sudden shocks.
Why is Financial inclusion important for SADC?
Overall, financial inclusion in the SADC region is relatively low and
varies widely across countries.
Though over half of adults (66%) living in the SADC region, are
financially included, 12% higher than the continent-wide average, 41,9
million people (34%) still do not have access to either formal or
informal financial services or products. Furthermore, substantial
variation exists between countries in the region in terms of levels of
access and in terms of the quality of financial inclusion.
Financial inclusion can improve livelihoods and contribute to
sustainable economic growth and stability. Specifically, as part of
economic development, financial inclusion can play a catalytic and
supportive role in industrialisation which is core to SADC.
That said, inclusion and the uptake of products and services in the
SADC region is relatively low and varies widely across countries,
pointing to the need for a regional strategy for financial inclusion. The
SADC Industrialisation Strategy highlights a number of barriers to
industrialisation, all of which can be catalysed through greater financial
inclusion. The ways in which financial inclusion can maximise the
potential of these pathways to drive industrialisation and economic
growth are summarised below and further elaborated on in Section
Dimensions of Financial Inclusion
Access refers to the availability of affordable and appropriate financial
products and services.
Access can be understood in two ways:
- Availability: access points to various services or products. These
services and products can include:
- Formal: number of ATMs and bank branches per user;
- Semi-formal: number of microfinance institutions, credit unions; or
- Informal: number of Village, Savings and Loans Associations (VSLAs), or moneylenders
- Appropriateness: products and services that meet the needs of the
client. For example a VSLA as opposed to an ATM or bank branch, may
be better placed in a community characterised by a high number of
Key observations: Without access, uptake of financial products and
services is limited.
Usage refers to the uptake or utilisation of financial products and
Usage can be understood as follows:
- Frequency: the number of interactions the client has with products
and services within a given time period. For example a client with a
dormant bank account cannot be classified as financially included if
they do not make use of the product and have no other financial
Key observations: Usage is often used as a proxy to determine
access and uptake of financial products and thus the depth of financial
Quality refers to product design and functionality that enhance the
value of services to clients.
Usage can be understood in four ways:
- Product fit: products and services that are well-suited and tailored
to the needs of the client.
- Value Add: products and services that add value to the clients
overall financial situation.
- Convenience: products and services that are easily accessible and
- Risk: access to products and services should not increase the
financial risk of consumers e.g. over-indebtedness due to reckless
Key observations: Quality also has a direct influence over usage i.e.
poor quality products will result in low usage. Furthermore, despite its
importance quality remains a difficult dimension to measure financial
source: Literature review; Dalberg analysis