Financial Inclusion and Digital Transformation Regulatory Practices in Selected SADC Countries

Financial inclusion attempts to provide digital financial solutions to a country’s economically disadvantaged citizens. It also plans to introduce mobile banking or financial services to reach the poorest individuals living in the country’s most distant places. The process of providing appropriate financial services to the “unbanked” (individuals or businesses) in a cheap, sustainable, and ethical manner is referred to as financial inclusion. This can include traditional credit through banking and insurance products, as well as saving mechanisms for healthcare or education, as well as investment items, allowing citizens to benefit even more from their economy’s rapid growth. Increased financial inclusion has been found to boost economic development, potentially raising GDP by up to 14% in emerging markets and 30% in frontier nations. According to World Bank statistics, 1.7 billion individuals worldwide, or 31% of the adult population, do not have access to financial services. Asia accounts for half of the unbanked population, with Africa accounting for 25% and Latin America accounting for 10%. Women make up a large share of the unbanked population. As a result, more financial inclusion can lead to greater gender equality. Financial inclusion, according to this chapter, is a crucial enabler of the United Nations Sustainable Development Goals (SDGs), which will be a key driver of poverty reduction and shared global economic success. This is significant for investors because economic growth is a key long-term driver of company sales and earnings, which in turn helps to underpin asset prices. Financial inclusion’s importance is underlined by being an aim in no fewer than seven of the 17 SDGs. The chapter will also serve as a synopsis of the book’s 16 chapters, all of which were authored by specialists in the field.

Financial Inclusion has been on the global policy agenda, including in the Southern African Development Community (SADC), for many years. Global standards-setting bodies, such as the United Nations, the Group of 20 countries, the Alliance for Financial Inclusion, the Financial Action Task Force (FATF), and the World Bank have committed to various financial inclusion policy initiatives. These bodies have recently introduced financial inclusion as part of their traditional policy and regulatory objectives, such as financial stability, integrity and consumer protection. Due to their varying mandates, these bodies often recommend conflicting approaches on the same objective when they pursue these objectives together with financial inclusion. Also, the international policy and regulatory framework on financial inclusion remains fragmented due to the haphazard policy and regulatory approach of these bodies. The Alliance for Financial Inclusion (AFI) and the Work Bank have developed policies and principles on how to develop national financial inclusion strategies. Various countries in Africa and in the SADC region have adopted different types of financial inclusion strategies based on the recommendations of these standards setting bodies. However, the AFI and the World Bank policies and principles are in the form of an international soft law. They are not effectively applied and implemented at regional and national level. These policies and principles do not impose specific national FI frameworks. This chapter critically analyses the current international policy framework on financial inclusion. It determines whether it is effective to impose obligations on countries to promote financial inclusion, focusing on setting policy and regulatory benchmarks for SADC countries. It discusses the framework and the principles introduced in the AFI and the World Bank’s National Financial Inclusion Strategy Reference Framework and the Template for the Design of National Financial Inclusion Strategy. The main aim of this chapter is to determine ways to formulate a responsive International Financial Inclusion Strategy with effective enforcement and institutional frameworks and how national financial inclusion frameworks, including in the SADC countries may implement and effectively enforce their financial inclusion frameworks. It further discusses a possible introduction of an Integrated Framework for Financial Inclusion that adopts an Inclusion-Stability, Integrity and Protection theory (‘I-SIP theory’) as an international standard. This theory requires national policy makers in the SADC region to pursue and optimise the linkage of financial inclusion with all the core objectives of financial stability, financial integrity and financial consumer protection. It also draws lessons of key enforcement mechanisms from the FATF’s anti-money laundering and countering of terror financing enforcement mechanisms to benchmark the regulatory, institutional and enforcement frameworks to promote global financial inclusion.

Since their emergence, cryptocurrencies are increasingly gaining uptake in the financial sector across the globe. In the sub-Saharan region, countries such as South Africa, Zimbabwe and Botswana have the potential to achieve financial inclusion through the use of cryptocurrencies. More specifically, unbanked individuals in these emerging market economies could be attracted to cryptocurrencies due to sentiments spawned by chrematophobia and other risks associated with the use of banks. The technology of cryptocurrencies could be deployed as sui generis instruments of payment, asset accumulation and investment, thereby challenging and dislodging conventional financial tools for transacting, storing and transferring economic value. More importantly, cryptocurrencies can drive financial inclusion by enlarging the space for monetary innovations in South Africa, Zimbabwe and Botswana, lowering the cost of transactions, making the countries less dependent on the use of cash, and promoting the transnational mobility of money. However, South Africa, Zimbabwe and Botswana seem behind in tapping into the financial inclusion opportunities presented by this new technology. This chapter argues that South Africa, Botswana and Zimbabwe need to adopt a responsive regulatory regime in order to reap the financial inclusion benefits derivable from the adoption of cryptocurrency technology.

Most of the Southern African Development Community (SADC) countries’ corporate statutes are similar to the United States of America’s (USA) state corporate laws and relevant USA federal legislation in prohibiting legal entities (including partnerships and close corporations) from being appointed as corporate directors. There are, however, a number of other SADC countries—mainly civil law countries—which allow corporate directors. This chapter contends that arguments against the use of corporate directors, as advanced in major developed countries of USA and UK, are overstated. The clearly defined role of the board in SADC countries’ companies means that available resources in corporate entities that can potentially be deployed in corporate boards are prevented from being so used due to the blanket ban on corporate directors. This unjustifiably prevents legitimate participants in the governance of corporate entities from appropriately benefiting in the proper running of those entities. The blanket ban against corporate directors further reduces the chances of preventing the malaise of corporate governance failures in selected SADC countries. The chapter aims to contribute to the establishment of an industry of board service suppliers as supported by some leading commentators in USA.

While Zambia has made strides in setting up legal and structural mechanisms aimed at enriching the lives of persons living with disabilities, these on their own are inadequate. More particularly, although these benevolent intentions are commendable, however, in an environment where these efforts are not supported by mechanisms that promote the financial independence of the disabled these will not avail much. This chapter considers the civil justice issue of the financial exclusion of persons with living with disabilities in Zambia. It contends that their inability to access financial services bars them from participating in wealth creation and therefore impedes the transformation of their livelihoods. In as far as it exposes such barriers, this chapter is vital in providing a platform upon which further research into social-economic justice in Zambia can be undertaken.

Zimbabwe experienced a financial crisis from around 2005 to date which was characterised by hyperinflation, currency instability and a collapse of the formal financial sector. This situation has impoverished many and led to the categorisation of many people in Zimbabwe as poor, informally employed and low-income earning. Additionally, as result of this financial crisis, mobile money services like Ecocash, Telecash, Mycash and Onemoney were established. These mobile money services have substantially promoted the financial inclusion of most people in Zimbabwe to date. Mobile money services have come in handy for most informal workers who account for approximately 85% of the workers in Zimbabwe who do not have formal bank accounts. About 90% of the adult Zimbabwean population uses Ecocash for mobile money transfers and for urban to rural money remittances for family support, payment for goods and services in retail settings. Apart from Ecocash, which has various savings, investments and loan provision services, it is evident that other mobile money services in Zimbabwe like Telecash, Mycash and Onemoney do not promote savings as conventional banking institutions would. Additionally, there has been rampant misuse of mobile money services in Zimbabwe including practices of money laundering. This status quo appears to result from the lack of a legislative framework for mobile money services in Zimbabwe. To date, the Reserve Bank of Zimbabwe (RBZ) and Postal and Telecommunications Regulatory Authority of Zimbabwe (POTRAZ) are responsible for the supervision of mobile money operations in Zimbabwe and their regulation through the Statutory Instrument Banking (Money Transmission, Mobile Banking and Mobile Money Interoperability) Regulations. To this end, this research will investigate the challenges surrounding mobile money services in Zimbabwe in a bid to promote financial inclusion in Zimbabwe.

This chapter addresses the experiences of land reform beneficiaries in South Africa, in relation to financial in/exclusion. It highlights that the government largely subject land reform beneficiaries to agricultural production within a costly agribusiness model without adequate access to financial and material resources. The chapter notes that black farmers continue to face obstacles when trying to access financial services, including within government agencies responsible for supporting agricultural development. Both public and private agencies are biased towards large-scale commercial producers in their distribution of financial resources and support. Consequently, land beneficiaries’ production is negatively affected by lack of resources, affecting access to better-rewarding markets and their income. Using a case study from the Limpopo province of South Africa, the chapter provides empirical evidence demonstrating how financial exclusion negatively impacts the livelihoods of land beneficiaries. The argument is that a combination of financial exclusion and effects of the imposed costly agribusiness model promoting large-scale production have undermined the production and livelihoods of land beneficiaries.

This chapter explores digital financial inclusion strategies for rural and urban communities in Botswana, Namibia, South Africa, and Zimbabwe. Financial inclusion has taken centre stage in academic discourses due to its criticality in enhancing socio-economic development. Digital financial services refer to services that are made available through mobile phones and the internet. The World Bank indicates that in developing countries, more households own mobile phones as compared to those who access water and electricity which highlights high mobile penetration rates in developing countries. Digital financial services are key in enhancing financial inclusion, by including the previously marginalised people into the formal financial system. Statistics reveal that more than 60 percent of the global population now has access to digital financial services hence regulators and policymakers must focus on this burgeoning issue. Huge disparities are evident in the levels of digital financial inclusion between the rural and urban communities for the countries under study, largely because of the marginalisation of rural communities and their depressed spending patterns. Proposed digital financial strategies should, therefore, address this anomaly and include the rural communities into the manifold of digital services to ameliorate the vagaries of poverty rampant in rural communities.

While social justice conversations seem to have been fading in philosophical arenas over the last decade, there remain legitimate reasons to keep them alive. In law, social justice debates have, by and large, been confined to human rights corridors. However, as will be argued in this chapter, social justice is about the organisation of society and the realisation of equality in material conditions. These aspirations cannot be realised if members of society are limited by ‘markets’ and ‘banking institutions. Therefore, there is a place for social justice within the banking sector, and more broadly, in other economic fields (including their regulation too). This chapter drives financial inclusion as a concept to advance this agenda. Financial inclusion seeks to expand the availability and equality of access for banking products. Safe to say, financial inclusion is about (social) justice in relation to banking products. Once established, this paper then explores the impact of competition in the banking industry in South Africa on financial inclusion. The paper finds, using a review of the literature and existing secondary data from empirical studies, that there is a definite correlation between an increase in competition in the industry and improved access and product ranges for consumers, as competitors attempt to garner new clients and markets. Oddly enough, competition law and financial inclusion are deemed to be strange bedfellows, sharing a common interest in transformation. The chapter recommends that further deliberate efforts, through law and policy, be taken to enforce competition within the banking sector and advocate for better financial inclusion.

It is challenging to calculate the value of Sub-Saharan Africa’s contribution to global trade because of the continent’s low financial inclusion, which mostly finances trade through the informal financial system. Although access to more affordable and effective formal financial services can help boost intra-African trade, small traders in Africa cannot afford to use official financial channels for cross-border transactions. Almost no official trade is conducted between African nations. The average exports and imports between nations on the same continent between 2015 and 2017 was only 2% in Africa, compared to 47%, 61%, 67%, and 7% in America, Asia, Europe, and Oceania, respectively. This is because although intra-African trade makes up more than 60% of regional trade, it is typically unregulated and thus informal. The African Continental Free Trade Agreement (AfCFTA) provides an opportunity to regularise such trade. The AfCFTA was ratified by 36 of the 54 African nations. On January 1, 2021, it was formally started with the intention of unifying the African market by removing 90% of tariffs and enabling free trade in commodities, services, and capital. In order to lower the cost of international transfers and contribute to the success of the AfCFTA, this chapter will argue that using mobile money to expand financial inclusion for individuals working in the informal sector is decisive.

This chapter illustrates that the South African government has narrowly approached the financial inclusion debate by failing to include retirement funding in its understanding of this concept. It argues that failure to identify retirement funding as one of the priority financial inclusion products, prevented the government from creating a platform that will enable those currently excluded from retirement funding to access important financial products offered by retirement funds. The chapter further argues that there is a need to establish a national retirement fund that would focus on those who are currently excluded from retirement funding. Moreover, this chapter argues that the membership of this retirement fund should be voluntary for those who currently have retirement funding but compulsory for those who earn a living but not currently saving for their retirement through retirement funds. This will prevent financial dependence on the state when people reach retirement age. This initiative must be accompanied by efforts to eradicate retirement financial illiteracy through provision of dedicated retirement funding education to all retirement fund members and future members.

The purpose of this chapter is to explore mobile financial technology ecosystem shaping financial inclusion in Zimbabwean banking and financial services markets. The chapter is based on a narrative approach of secondary data sources, mainly peer reviewed reputable journal articles. The purpose being to draw conclusions and identifying the research gaps that exist within the banking and financial services markets in Zimbabwe. The chapter is based on a structural analysis methodology to frame the categories of the major analysis in combination with scientific rigour to a broad and complex problem. Research results proved that the mobile financial technology ecosystem shaping financial inclusion in Zimbabwean banking and financial services markets is a necessity for sustainable economic growth and development. Implications to contemporary banking and financial services industry business leaders include bringing-in present day digital financial technologies, incubating survival plans of actions or strategies so as to fully operationalise mobile financial technology seamlessly. In addition to this, establishing technological innovation appetite is meant to address, respond and navigate within the associated financial digital disruptive complexities for the sustenance of banking and financial services markets in Zimbabwe. The study results underscore the necessity of understanding mobile financial technology ecosystem so as to design relevant strategies in a bid to carve financial inclusion in Zimbabwean banking and financial services markets. With its novelty, the chapter conceptually examines how mobile financial technology ecosystem can shape financial inclusion in Zimbabwean banking and financial services markets. It contributes to literature and theoretical novel introspections into the depth and breadth of how mobile financial technology can contribute to the development of financial inclusion in the Zimbabwean banking and financial markets.

Financial inclusion is a process that enables the ease of access, availability and usage of formal financial services for all members of an economy. It is a United Nations Sustainable Develop Goal (SDG) earmarked to alleviate poverty and income inequality. As such, financial inclusion has attracted the attention of many researchers and policymakers. However, the outbreak of the COVID-19 pandemic has brought the whole world to a standstill. It has impacted many facets of the economy. The pandemic has reshaped the financial services sector. Financial inclusion is one facet of the economy that has been affected positively and negatively by the pandemic. This chapter explores the literature on financial inclusion and its challenges and opportunities induced by COVID-19. The chapter further explains the challenges and prospects of financial inclusion due to the COVID-19 pandemic. It concludes by illuminating future research directions.

The small-scale fisheries (SSF) sector in Namibia has largely been financially excluded and mostly characterised by a limited access to financial services, and scarcity of financial resources for investment fishing projects. This is attributed to the fact that most of fisherman constituting Namibia’s SSF sector are from marginalised coastal communities owing to a limited or restricted access to marine resources and amongst the most marginalized communities such as the Topnaar community. Their low social status is a result of poverty as well as exploitation by middlemen and merchants. Middlemen have control over credit and fish marketing, which drains away the surplus generated and often make them indebted. A combination of variability in catch, technology upgrades, over capitalization, rising costs, aggressive fishing, overcrowding, amongst other issues, have made economics of fishing and fishing related occupations uncertain. The overall output remains almost the same but the investment and operational costs have gone up considerably. This has resulted in fishermen getting increasingly dependent on loans to finance their expenditures and also using loans as coping mechanism. There is a widely held belief that Namibia has no marine artisanal fishery. Fisheries legislation provides for commercial fishing, dominated by a large-scale industrial fleet, and recreational fishing (from which the sale of catches is prohibited). At the fringes of both these fisheries, however, there are a small number of individuals who operate in a way that would be described as artisanal elsewhere in the world. This chapter argues for the use of financial inclusion mechanisms as a means to empower the SSF sector in Namibia.

The Ministry of Fisheries and Marine Resources has been applauded intercontinentally for laying the groundwork to develop the Namibian fisheries sector since the dawn of the country’s independence in 1990. However, there are no financial inclusion policies for small scale artisanal fishermen. This paper aims to report on barriers to integrating financial inclusion for coastal small-scale fishermen into the Namibian fisheries policies and regulatory frameworks. This chapter reviews the understanding of financial inclusion, the elements of financial inclusion such bank inclusion and financial credit schemes breaks for the economically marginalized small-scale fishermen and access to fish markets for the small-scale fishermen. It provides a review of various international policies and regulatory frameworks that should guide financial inclusion of the small-scale fishermen. Among, the international policies, it is shown that the FAO guidelines for Securing Sustainable Small-Scale Fisheries in the Context of Food Security, the Sustainable Development Goals 14, target 14b and 17 have the potential to promote and strengthen financial inclusion for the small-scale fishermen. The national level policies and regulatory frameworks do not make specific reference to the small-scale fishermen. However, the development of the National Plan of Action for the small-scale fishermen in Namibia will be a potential for including small-scale fishermen into the Namibian policies and regulatory frameworks, although the aspect of financial inclusion is still unclear. The barriers to financial inclusion are that financial institutions are hesitant to run into business with the small-scale fishermen because the majority of them do not have collateral and bank accounts, they do not have access to the market for their harvest, they lack education, training and capacity, and have limited production capacity. There is also the skewed perception that the recognition of the small-scale fishermen will result in the over exploitation of marine resources if their capacity to catch more fish is enhanced. The small-scale fishermen are urged to set-up support organisations to promote representative participation in the development of policies and vouch for financial inclusion. The Government of Namibia is urged to set-up schemes to provide financial credit guarantees for the small-scale fishermen. Moreover, capacity strengthening among small-scale fishermen are recommended to provide expertise in post-harvest handling, preservation, processing, and marketing of marine products as well as providing an integral relationship with markets.

This chapter interrogates the policy and regulatory frameworks for financial inclusion in the Southern African Development Community (SADC) region, focusing on South Africa, Botswana, Namibia and Zimbabwe. Financial inclusion plays a pivotal role in the economic development and inclusive growth of a country, as well as a critical role in the alleviation of poverty, reduction of gender inequalities and improvement in the standards of living for societies. Notwithstanding these benefits, constraints to financial inclusion in the countries under study include lack of trust in the financial services sector, financial illiteracy, high costs of setting up banks in remote rural areas and poor infrastructure. Generally, to some extent, the sampled countries have instituted country specific policies and regulations that are geared towards the enhancement of financial inclusion in their respective countries which has resulted in positive outcomes. However, in some instances, there is no coordination between financial policies and other legislation to realise countrywide financial inclusion. In view of the preceding information, it can be recommended that there should be common financial inclusion legislation that is effectively and homogeneously applied in the SADC region, that must be upheld by all member states for uniformity to realise greater financial inclusion.