Financial inclusion strategies in a dollarized illiquid environment: Analysis of conduct and behaviour of banks in Zimbabwe (2009 - 2013)

Financial inclusion has proved to be a strong weapon against poverty. At least two billion of the world’s population is estimated to be financially excluded and in Zimbabwe at least 65 percent of the rural population was estimate to have no access to basic financial services. Access to financial services affords the poor the opportunity to actively participate in the growth of their economy. Banks play a vital role in ensuring financial inclusion. However banks alone are unable or not willing to serve low income market citing, high costs and infrastructural problems. Government support was also cited as being of paramount importance to ensure that banks became financially inclusive. The main objective of this study was to analyze and investigate the models adopted by banks for financial inclusion. Primary data was used for this study and semi-structured interviews were used. Sixteen middle level managers (marketing, retail banking, operations, branch and microfinance from various banks who were involved in the distribution of low-level financial products and services and four IT managers responsible for systems administration and mobile banking were interviewed. The research used judgmental sampling method to select the interviewees. The study revealed that banks adopted branch expansion, microfinance and very few banks were still using conventional mobile banking. The models were however said not to be financially inclusive as they lacked products suitable for the poor. The findings also revealed that almost all banks have introduced mobile phone based products but the products were rather additive than transformative and benefited the already banked at the expense of the unbanked. Banks cited high costs; low uptake of products meant for the unbanked, policy restriction especially the MOU on bank charges and interest rate caps as the main challenges to financial inclusion. Based on the research findings, the researcher recommended the adoption and use of innovative means to bank the rural poor. The researcher recommended the creation of partnerships between mobile network operators (MNOs) to usher a mobile phone based bank account, creation of a joint promotional drive and consumer education to create awareness and the reduction of bank charges to a level that leaves banks in a viable position but yet affordable to the poor