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Challenges Around Financial Services Access in the Agricultural Sector in Mozambique

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By Joao Mutondo

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Challenges Around Financial Services Access in the Agricultural Sector in Mozambique

  1. 1. Challenges Around Financial Services Access in the Agricultural Sector in Mozambique Joao Mutondo Edwardo Mondlane University Member of the Mozambique Local Analysis Network
  2. 2. OUTLINE I. BACKGROUND II. OBJECTIVES III. METHODOLOGY IV. RESULTS V. CONCLUSIONS VI. RECOMENDATIONS
  3. 3. I. CONTEXT 1. The development of agricultural sector is crucial for the development of the country as it contributes with about 23% to the GDP and employs about 80% of the labor force. 2. CCADP (2003): 10% of the budget for agriculture 3. MALABO (2014): Double access to financial services by 2025. Contribution of key sectors in the economy
  4. 4. II. OBJECTIVES to review the policy framework guiding farmers’ access to financial services;  to describe the financial organizational set up and functions;  to analyze the trends of farmers’ access to financial services; and  to identifying the key challenges and opportunities faced by farmers when accessing financial services.
  5. 5. III. METHODOLOGY • Qualitative analysis  Description of existing policy framework (Key objectives and targets) Description of existing organizational framework • Trend analysis Financial inclusion index Number of bank accounts Electronic money account Accumulative Savings and Credit Associations
  6. 6. IV. RESULTS: POLICIES CAADP Processes PEDSA (2011-2020) PNISA (2013-2017) National Processes: Rural Development Strategy (2007-2025) Economy Bancarization Strategy in 2007; Rural Financing Strategy in 2011; Strategy for the Development of Financial Sector (2013-2022) National Strategy for Financial Inclusion (2016-2022)
  7. 7. IV. RESULTS: ORGANIZATIONAL SET UP
  8. 8. IV. RESULTS: ACCESS TO FINANCIAL SERVICES
  9. 9. IV. RESULTS: FINANCIAL SERVICES Trend of bank accounts per 1000 adults
  10. 10. IV. RESULTS: ACCESS TO FINANCIAL SERVICES Electronic money account users
  11. 11. IV. RESULTS: ACCESS TO FINANCIAL SERVICES Proportion of men and women using Accumulative Savings and Credit Associations (ASCAs) as mean for accessing financial services
  12. 12. IV. RESULTS: SMALLHOLDER ACCESS TO FINANCIAL SERVICES Smallholder access to financial services
  13. 13. IV. RESULTS:CONSTRAINTS TO SMALLHOLFER FINANCIAL SERVICES ACCESS 1. Low production and productivity yielding to low farmers’ income 2. Lack of assets (land) to be used as collateral 3. Limited coverage of financial institutions 4. High interest rates coupled with lack of agricultural insurance 5. Farmers’ illiteracy regarding financial markets 6. Limited government institutionalization of informal mechanisms for promoting access to financial services
  14. 14. V. CONCLUSIONS 1. Smallholders’ financial inclusion is driven primarily by informal services, as 12 percent of them access informal services, compared with 8 percent who access banks and 2 percent who access other formal services. 2. Smallholder access to financial services is higher in urban areas compared to rural areas. 3. The access to formal services is estimated to be 32.9% and being dominated by men (60% of bank account holders) compared to their women counterparts 4. The percentage of adults having electronic money account through mobile phone increased from 1% in 2012 to 40% in 2016. • In 2015 men were using more mobile account than women but the women counterparts have practically matched the use of mobile accounts in 2017 with minimal difference of 9 percentage points (81% for women vs 90% for men).
  15. 15. 5. ASCAs are used successfully and, where they have been introduced, are highly valued as a means of saving and benefiting mainly farmers and especially women (67%) is the ASCAs. • The key feature of ASCAs is its geographical coverage as it is present in all districts with coverage rate above 50% in all provinces except Zambezia with coverage rate of 41%. V. CONCLUSIONS
  16. 16. VI. RECOMENDATION FOR MASA 1. Promote the expansion of private sector with direct participation of the smallholders. 2. Promote the efficiency of pro-smallholder value chains. 3. Explore models of using land as collateral. 4. Continue to promote the use of mobile accounts. 5. Regulate/institutionalize the main informal means of accessing financial services. 6. Continue to promote the establishment of non and bank agents in rural areas. 7. Collect and analyse data related smallholder access to financial services.
  17. 17. Thank You All!

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