It's Raining Banks, Halleluja!

Hi everyone,

I know I know, It’s been a while. But… after celebrating Christmas and the New Year’s with friends and family, and enjoying two weeks of training and meetings in Zambia, I’ve settled back into the rhythm in Mozambique. And more importantly for all of you: the blog is back, and this week the topic is Finance.

On my return to Mozambique, unfortunately, I ran into some financial problems myself (creditcard blocked, uber annoying), though everything has been solved now. Still, it made me realise once more how big a role financial institutions play in the global system, and the huge potentially crucial role they can play in developing countries.

For me personally, it was simply frustrating knowing that I had sufficient funds on my account, but there was just no easy way of accessing it. In Mozambique, a similar problem is making it more difficult for people and for the country to develop: there is so much potential capital here (ideas, skills, capacities, business opportunities) which simply cannot get unlocked or unleashed because of the numerous of stumbling blocks people face day-in day-out.
The biggest stumbling block I see at the moment – the topic of the week, surprise, surprise – is the lack of a good connection between on the one hand the enormous amounts of people who either want start-up capital or want to deposit their savings, and on the other hand the plethora of banks and other financial institutions who have branches in even the smallest of villages. Here in Chimoio there are no less than eight different banks (including two microfinance institutions) which all have offices on the main street which stretches on for less than a kilometre. Plenty of opportunities to acquire a loan, or deposit your savings, one might think.

Think again. For the average Mozambiquan, it still remains difficult to even open an account, partly because of the stringent preconditions banks require from potential customers – a long waiting period, general costs when opening an account, depositing a minimum amount, having an officially registered address. And how difficult it may be at times to open a bank account, it’s nothing compared to the countless procedures that come about when trying to successfully close a loan.

In sum, the financing supply is definitely present – somewhat overrepresented in my opinion – but at the moment it just isn’t matched with the equally big financing demand. This explains why the numerous financing options and credit schemes for the poor just haven’t taken off as expected (with the odd exception).

Finally, I would like to briefly describe an example from Zambia, where they have tried to avoid this finance-matching problem through the “lay by” principle. On request of the client, the retailer/shop owner can allow the client to pay in instalments, and the client will only be able to take home the product or system once the total sum has been paid over a certain time period. This way, the retailer carries basically no risk – with the exception of him safeguarding the paid advances from the client – and the risk is carried entirely by the client. The client actually just opens a savings account with the retailer, where he wants to buy an expensive product (most probably within a certain time period).
As of yet, I haven’t come across this innovative system in other countries, and for me some questions still remain unanswered – e.g. I would prefer to keep my savings at home if I couldn’t open a bank account, rather than give it to a retailer in good trust. Still, this second option is growing in popularity in Zambia.

To be continued.

Luc