The Reserve Bank of Zimbabwe (RBZ) defines financial inclusion in the context of Zimbabwe as “The effective use of a wide range of quality, affordable & accessible financial services, provided in a fair and transparent manner through formal or regulated entities, by all Zimbabweans.” The components of financial inclusion are not contentested and generally revolve around access, usage and quality of financial services and products. Affordability of the products is at times taken as a separate component but I argue that it is part of accessibility. If products are not affordable it follows that they are not accessible.
It is important to note that the three main actors in financial inclusion are:
• the government through public policy pronouncements and establishment of the broader environment,
• the regulators through targeted policies, directives and monitoring and,
• the business such banks and other non-banking financial institutions and near category player like mobile network operators through mobile money.Businesses do so through either token compliance or deliberate business strategies that result in creation of inclusive properly designed, distributed and priced solutions.
The customers are supposed to be located at the core of the three players named above as beneficiaries through the facilitation and promotion of usage of financial products. A complex therefore exits among the three main players. It is in the interest of business to be seen as being supportive of financial inclusion in order to be on the good side of regulators. Regulators also have to be seen to be supporting government drive around the same. Government has to be perceived by the populace and the greater global community to be driving financial inclusion. Every player therefore has a vested interest.
Financial inclusion can be viewed as a concept,a policy and/or business strategy and a practice. From a business and customer standpoint the highest point of success is to make financial inclusion a business strategy and practice. Let us briefly consider these various dimensions in greater detail starting with the policy dimensions of financial inclusion.
Social Policy Dimension: Financial inclusion is deemed to play a significant role in the reduction of inequality and poverty. It is argued that when poverty is eliminated or drastically reduced the dividends of such are improved welfare, peace and stability. This view is corroborated in the 2016 Nobel Peace Prize press release, for the founder of Grameen Bank, Muhammad Yunus which articulated that; “lasting peace cannot be achieved unless large population groups find ways in which to break out of poverty.”
Financial Policy Dimension : Financial inclusion helps reduce concentration risks. If the majority of a citizentry both individuals and corporate citizens are included in financial ecosystem of a country, the financial risks are spread across a broader base thereby promoting financial stability.
Economic Policy Dimension: The thesis of this dimension is that financial inclusion means that the majority of people are participants in the economic activities of a country. If this is the case people particularly in lower income bracket, the bottom of the economic pyramid, will have access to financial service thereby spurring economic growth.
POLITICAL ECONOMY OF FINANCIAL INCLUSION
Political economy factors have a bearing on the structure and strength of financial inclusion. Martinez (2011) concluded that political economy factors such as democracy, leadership durability, government transitions, executive and legislative electoral competitiveness among others have a bearing on financial inclusion.
What is not clear is the degree to which financial institutions or any other enablers or players within the banking ecosystem influence or shape the political economy factors or complements them in promoting financial inclusion. It is also important to understand how banks are able to navigate the challenges presented by the political economy in their attempt to bring societal good especially in the area of financial inclusion.
Contrary to the common belief that the government should play only a regulatory role, it actually can be an active player in the market. Issues of poverty reduction, welfare provision are salient within the body polity and cannot be left to the private players alone. The perspective that bank activities are a function of profit motive alone while governments’ main role is to drive the greater good presents an interesting dynamic when juxtaposed with the important observation that the survivaland relevance of political actors in office is often linked to the reduction of poverty and improvement of welfare, factors which are expected to be some of the attributes of financial inclusion.
Scholars such as Adam Napier argue that there are three levels at which governments play in the financial sector namely modernism, pro-market activism and activism.
Modernism: government provides enabling environment for financial sector players to operate and provide services to the general citizenry. Some of the measures that the government may take include the privatisation of state owned financial entities, ensuring that the central banks have the relevant capital levels to operate as lendersof last resort, promulgation of relevant legislative frameworks that promote diversity, inclusion and vibrancy of the financial sector.
Pro-Market Activism: Using this approach the government significantly becomes active in the market. It plays a pro-market role in that it directly influences the structure and performance of the financial sector through other means such as provision of market subsidies, tax incentives, information dissemination, and creation of specific charters and pronouncement of pro market policies.
Activism: Under this approach, the government is a significant player in the market. It establishes and operates its own financial institutions. Examples in Zimbabwe include establishment of players such as the AFC, focusing on agricultural and land development as well as the Infrastructural Development Bank of Zimbabwe (IDBZ).
Often tension arises as a result of the different approaches to government involvement in financial sectors. Market modernism is usually sponsored and supported by donors and other multi-lateral organisations whereas governments oftentend to favour activism as an approach. The jury is still out on what best works for Zimbabwe.
Dimensions of Political economy of financial inclusion
Structural Factors: These have a bearing on the overall political and economic structures that prevail. Usually there is a high degree of competition for power, authority and influence among economic players in a particular environment. Individuals and groups show their desire to dominate the economic space through high levels of investments. Johnson and Williams (2016) posit that often in African states structural authorities are based on neo-patrimonialism where personal relations with those in power has an influence on rent allocation and distribution. To this extent only those who are connected to power have the ability to contest and succeed in resource distribution. Financial services such as subsidised credit and debt write offs are a perceived to be a preserve for the few.. Market structures therefore may lead to the majority being excluded from financial participation. Some scholars argue that governments are creators of market structures through the promulgation of relevant policies and legislative pronouncements. It is argued however that most central banks do not necessary focus on the depth and breadth of financial inclusion but are rather interested in the safety of financial institutions.
Institutional landscape and the level of how financial organisations are institutionalised have a bearing on the political economy of financial inclusion. Underpinning this dimension is the view that financial inclusion is usually driven by donor agencies. It is because of the pervasive influence of donor dependency that financial inclusion is impacted. Most donors are deemed not to have a correct understanding of local nuisances such as culture, social norms and local politics. For example the role and influence of religion is seldom understood by donors and the framing of the financial players and the resultant institutionalisation of the same maylead to exclusionary practices .
Financial Inclusion as policy: Financial inclusion has critical role as policy which drives key fundamental agenda items. It is viewed as a policy that drives the social agenda that reduces the gap between the poor and the rich. It is important to note that nations are keen to drive financial inclusion as it helps them align with global trends. For developing countries, especially those that may be undertaking structural adjustment programmes, implementing financial inclusion policies maybe one of the conditions of receiving support from the multilateral financiers.
Financial Inclusion as Business Imperative: There is evidence which suggests thatfinancial inclusion drives development and entrepreneurial opportunities. If given enough product choice, appropriately designed credit facilities micro business tend to increase their chances of success in their business. Once small businesses begin to be successful, they create activities in the economy through increased productivity, creation of jobs and inclome levels grow, As this cycle continues, many people’s disposible income increases and the need for financial intermidiation grows. The need to save, to borrow or to access other types of financial products rises, thereby making a business case for more players to invest in financial services provision.
Financial Inclusion as Political Tool– financial inclusion can be used as a political tool. There are a number of political dynamics that governments and political players do in the name of financial inclusion. Examples are setting up of clubs, promotion of credit unions, availing of cheap or zero rated facilities among other in order to entice the electorate.
Clearly there are multiple parties that are interested in financial inclusion. The government, the central bank and business complex can never be underestimated. While there maybe no formalized collaboration, all the parties have a key role in it. Their agendas may vary but there is an some form of collaboration and if done well with adequate safety measures, the general public benefits.
What is important is that for financial inclusion to work each of the players in the ecosystem should have clarity of purpose. For financial institution, it is important that financial inclusion is part of the business core strategy with clearly defined milestones and pillars such as inclusive pricing, correct product design , access platforms and the dedicated Human Resources to drive it. Financial inclusion should never be tokenistic in nature.
Regulators should continue to improve its visibility in driving financial inclusion. One of the simpler ways in which central banks can influence inclusive participation in the financial ecosystem is through policy changes which will reflect the elevation of financial inclusion in national financial discourse. Key measures can include a requirement for financial institutions to have board subcommittees on financial inclusion in the same manner that there are mandatory compliance, audit and credit board committees among others which are mandated to have closer oversight on related processes that are deemed essential. Secondly it may be important to make it a requirement for financial institutions to disclose, as part of their annual financial reports, all activities and progress made towards the attainment of clearly spelt out financial inclusion milestones.
Whatever the complexities of financial inclusion and the associated complexes, the ultimate winner should be the ordinary person in the street.
(c) First published in the Banks & Banking Survey magazine , 2022
Kejad Insights 
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