Windhoek
Namibia is at the turning point, with “inclusive growth” on top of the new government’s development agenda. However the big question is whether the aspired growth will be attained with “financial inclusion” absent from the top priority list of Government? Furthermore, will this growth be translated into significant poverty reduction and shared prosperity and will it provide low-income households and other vulnerable groups enough opportunity to improve their living standards? The answers to these questions lie within the role of “financial inclusion” in the whole process of achieving a sustainable “inclusive growth”.
The concept of inclusive growth is multifaceted and has financial inclusion as one of its main building blocks. My view is that for sustained and inclusive development to thrive, a great deal of focused innovation and thinking is needed to ensure that appropriate financial services and instruments are put in place for the benefit of poor and other vulnerable groups.
Financial inclusion of the unbanked masses is a critical step that requires political will, bureaucratic support and dogged persuasion by the monetary authority.
It can unleash the hugely untapped potential of the bottom of pyramid section of the Namibian economy. Perhaps, financial inclusion can begin the next revolution of growth and prosperity for all Namibians.
Rationale for Financial Inclusion
The Namibian government’s aspiration of achieving inclusive growth as stated during the National Budget and State of the Nation address will not be possible without financial inclusion receiving similar attention as inclusive growth. The term “inclusive growth” came to the fore during the National Budget and the State of the Nation address at the dawn of the new government. Inclusive growth, which implies participation as well as sharing the benefits from the growth process, has received more attention since becoming the theme and the focus of government.
While this focus presents a fresh breath of policy focus and has been welcomed by the majority populace, Government’s silence on an equally important determinant of social inclusion – “financial inclusion” – is worrisome. Financial inclusion, which is considered to be an important determinant for social inclusion of the poor and vulnerable, deserves the same attention as its counterpart “inclusive growth”.
In fact, Government ought to know that it is one of the essential conditions for reduction of poverty and socio-economic inequalities in the society.
By definition, financial inclusion is defined as the process of ensuring access to financial services, timely and adequate credit where needed by vulnerable groups such as weaker sections and low income groups at an affordable cost. Here the financial services, which include a wide range of services like access to savings, loans, insurance, payments and remittance facilities offered by the formal financial system, are critical in providing economic security to the lower income households. Financial inclusion therefore is a major arsenal in the fight against poverty – a critical ingredient that deserves the same status of priority as inclusive growth.
Financial Inclusion Is a Public Good
My insistence of wanting to see Government placing more emphasis on strategies to enhance financial inclusion as the catalyst for inclusive growth stems from the belief that financial inclusion is and must be construed as a public good, a good that can be provided by the Government alongside others such as national defence, health and a social safety network. Because of Government’s role as the custodian of a conducive policy environment, many governments across the globe have started to treat it as a public good already. Experience from these countries shows that positive externalities associated with financial inclusion includes: (1) The value of the entire national financial system increases; and (2) the fuller participation by all the financial systems make monetary policy even more effective and thus enhance the prospects of non-inflationary but inclusive growth.
Since financial inclusion is viewed as quasi-public good Government should provide it with other agencies and hence my wish to see and hear Government pronounce itself more on this issue.
With many countries realizing the need for treating financial inclusion as a policy imperative for inclusive growth, there is no reason why Namibia cannot initiate efforts in order to increase focus on this matter. Several countries have already enacted legislative measures towards this end and prominent in this regard are the United Kingdom’s Financial Inclusion Task Force, the United States’ Community Reinvestment Act as well as France’s Law of Exclusion. Although the Government of Namibia has since formalized its efforts to enhance financial inclusion, via the Namibia Financial Sector Strategy (NFSS) 2011-2021, tangible results are yet to be seen.
How Can Financial Inclusion Be Facilitated?
Financial inclusion is the need of the hour which is possible through coordination between governments, first and foremost, banks and others to facilitate inclusion among the financially excluded. This relation will enhance the transformation of financial architecture fitting to the needs of inclusive growth. The tripartite can leverage on the technological advance the country is enjoying and promote e-banking i.e. particularly the usage of mobile banking. The banks should therefore continue to ensure that they reach the financially excluded population or unbanked Namibians over time. Equally important is the integration of financial literacy programmes in the formal education system across all levels. The efforts of Government thus far in this area are well commended, but there is more room for improvement as this will enhance and promote the active role of education in furthering financial inclusion.
• Mally Likukela is Standard Bank Namibia’s Manager of Economic & Market Research