THIS week, we look at the convergence of information and communication technologies (ICTs) and financial services in Zambia and the benefits that this brings to our country.
Monday November 24, 2014 marked an eminent occasion for regulators in the ICT sector and the financial services sector respectively.Â On this date, the ZICTA and the Bank of Zambia signed a memorandum of understanding (MoU) outlining how the two institutions will work together in the supervision and regulation of areas of common interest.
This partnership between the two institutions follows cognition by the two regulators that ICTs and financial services have attained some convergence in their development.
There are clear and positive linkages between access to financial services and economic development. Inadequate or inaccessible financial services are undoubtedly one of the major reasons why a large proportion of the poor are trapped in poverty today.
Unfortunately, a significant proportion of Zambians still remain outside the realm of either formal or informal financial services.
The latest Finscope survey for Zambia conducted in 2009 revealed that only 37.3 percent of Zambian adults are financially served leaving 62.7 percent of adults financially excluded from either formal or informal financial services. The report further notes that of this proportion, only 23.2 percent of Zambian adults are formally served with about 13.9 percent having a bank account and 9.3 percent with access to other formal financial products, though they do not have a bank account.Â On the other hand, about 14.1 percent of adults in Zambia access informal financial services only.
Without access to finance, poor people cannot invest in tools to increase productivity, start a microenterprise and invest in education or health. In addition, the conventional way of providing financial services requires a physical location for which people need some form of transportation or incur huge opportunity costs through their loss in productive time to get to the location. Both of these costs can be problematic in an infrastructure constrained.
It is for this reason that developments in both financial services and ICT provide an enormous opportunity for enhancing financial inclusion in a country like Zambia.Â Particularly, mobile phone technology offers the promise of reducing the cost of delivering financial services and improving access to financial services.
Today, there are over 9.5 million active sim (subscriber identity module) cards on the Zambian market representing a mobile penetration rate of over 65 percent.Â With the exponential growth rates in mobile penetration experienced over the years, access to mobile phone services is expected to increase even further. Therefore, the private sector can leverage on this mobile phone penetration position to provide financial services to the unserved population.
The convergence of telecommunications and the provision of financial services have also set the pace for regulatory interaction and cooperation between the BoZ and ZICTA.Â This is with a view to ensure that favourable market outcomes for both providers of financial services using telecommunication or ICT platforms and consumers of these financial services are attained.
The MoU signed between the BoZ and ZICTA outlines specific areas of regulatory and supervisory collaboration on mobile financial services between the two organisations.
These include among others the implementation of government policies aimed at enhancing financial inclusion, joint inspection of entities in which both institutions have a regulatory interest, the development and implementation of a framework for consumer protection, dissemination of information on mobile financial services, matters related to cyber security in mobile financial services and the implementation of guidelines on market conduct.
This collaboration will also facilitate the resolution of money transfer related consumer complaints.
It is envisaged that through this partnership, the country will achieve remarkable progress in the development of mobile financial services and the attainment of favourable development outcomes.
For more information contact ZICTA