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AFRICA RURAL AND AGRICULTURAL CREDIT ASSOCIATION (AFRACA)

AFRICA RURAL AND AGRICULTURAL CREDIT ASSOCIATION (AFRACA). SUB-REGIONAL WORKSHOPS 20 TH -22 ND NOVEMBER 2007 LEONARD MWANZA CEO NATIONAL SAVINGS AND CREDIT BANK. RESEARCH TOPIC “Innovative Approaches in offering quality Savings to the rural poor”

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AFRICA RURAL AND AGRICULTURAL CREDIT ASSOCIATION (AFRACA)

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  1. AFRICA RURAL AND AGRICULTURAL CREDIT ASSOCIATION (AFRACA) SUB-REGIONAL WORKSHOPS 20TH-22ND NOVEMBER 2007 LEONARD MWANZA CEO NATIONAL SAVINGS AND CREDIT BANK

  2. RESEARCH TOPIC “Innovative Approaches in offering quality Savings to the rural poor” The case of National Savings and Credit Bank (NATSAVE)

  3. 1. INTRODUCTION 1.1 ABOUT ZAMBIA Location Central Africa Geographical Area 752,614 km² Population 11.5 million Population distribution 56% live in rural areas 44% live in urban areas Inflation rate 9% GDP US$4.346 Billion Major Exports Copper

  4. 1.2 ABOUT NATIONAL SAVINGS & CREDIT BANK (NATSAVE) 1.2.1 FORMATION NATSAVE was established in 1972 through an Act of Parliament. This followed economic reforms of 1968 which embraced development of rural banking. Hence ownership is vested in Government under Ministry of Finance 1.2.2 BRANCH NETWORK - Bank has 26 branches and is represented in all the provincial centres - Fifteen (15) of the branches are in the rural areas.

  5. ABOUT NATIONAL SAVINGS AND CREDIT BANK (NATSAVE) (CONT’D) 1.2.3 RATING NATSAVE is rated fourth most used Bank by the adult population in Zambia (Finscope, 2006 Survey). 1.2.4 INSTITUTIONAL DEVELOPMENT PLAN Government has endorsed and pledged to support NATSAVE’s Institutional Development Plan (IDP), a strategic document with a strong focus on rural banking strategies and covers the next 10 years.

  6. 2. INNOVATIONS 2.1 BRANCH NETWORK EXPANSION PROGRAMME - More branches opened in the rural areas to increase the Bank’s reach to rural communities. - Accessibility to the rural unbanked communities has been increased.

  7. CHALLENGES (a) Rentals All the 15 rural branches are housed in rented properties. Landlords’ perception results in frequent increases in rentals, hence reducing Bank’s profitability. Bank strategically acquiring premises in economically viable rural areas, for good business levels to cover rental costs.

  8. CHALLENGES (CONT’D) (b) Rural Infra-structure (i) Road Network - Poor road networks - Cash transportation highly risky and expensive - In mitigation, Bank has increased cash holding limits for rural branches, hence reducing on number of runs.

  9. CHALLENGES (CONT’D) (ii) Water and Electricity - Supplies unreliable - Bank partnering with rural communities for contingency supplies of water & electricity (iii) Telecommunications - Expensive and unreliable - Bank is upgrading its computer system to a real time banking system via intranet

  10. 2.2 PRODUCTS Tailor-made products have been designed, specifically to suit the rural poor. (a) Rural Savers Account - Suitable for non-salaried rural savers - Low minimum balance – K20,000 (US$5) - No charges (b) Pensioners Accounts - For pensioners only - Low minimum balance – K5,000 (US$1) - No monthly charges.

  11. 2.2 PRODUCTS (CONT’D) (c) Market Account - Low minimum balance K5,000 (US$1) - Suitable for people conducting business in markets - Customers qualify for group or individual loans - Flexible security (d) Ordinary Savings Account - For both urban and rural customers - Suitable for small savers - Low minimum balance - Withdrawals allowed every 7 days - Minimal charge per month

  12. 2.2 PRODUCTS (CONT’D) (e) Regular Savings Account - Low minimum balance - Withdrawals only allowed twice a year - No charge (f) Fixed Deposit Accounts - For personals, corporates, institutions etc - For 30, 60, 90,180,365 days - Interest is negotiable

  13. 2.2 PRODUCTS (CONT’D) Natsave’s current deposit base stands at K104 billion (US$28M). The fifteen rural branches account for 41% of the total deposits. Total number of accounts stands at 117,065 of which 44,357 are rural based and 72,708 urban based.

  14. 3.0 PRODUCTQUALITY/ COMPARATIVE ANALYSIS On average, Commercial Banks in Zambia demand minimum balances of between K50,000 (US$15) and K1 million (US$250), with monthly charges ranging from K10,000 (US$2) to K50,000 (US$12). {Bank of Zambia 10/09/07}. Comparatively, Natsave’s quality of savings products is superior both in terms of suitability and affordability.

  15. 4.0 CONSTRAINTS Despite the above merits, constraints still exist. Rural people are cautious in letting others have their money. Safety, continuity and secrecy are some of the factors that foster confidence (Padmanbhan, 1996)

  16. 5.0 STRATEGIES TARGETED AT THE UNBANKED • Sponsoring traditional ceremonies and interacting with Chiefs, who are opinion leaders • Participating in local events. • Lending to teachers in rural areas. These serve as first centres of information and are able to disseminate positive information about the Bank.

  17. 5.0 STRATEGIES TARGETED AT THE UNBANKED (CONT’D) • General sensitisation programmes through radio programmes in local languages in various community radio stations. • The Bank has created money windows under which branches have specific days when they visit markets to collect deposits. This enables marketeers who may not have time to come to the Bank, have the opportunity to save. - Cross selling of the money transfer service to customer and non customer.

  18. LINKAGES WITH AGRICULTURAL INSTITUTIONS AND NON-GOVERNMENTAL INSTITUTIONS • Payments for the purchase of crops by Government, particularly maize, rice, cassava. • Fertiliser support programmes by Government for farmers. • Donor funded poultry projects. • Cotton Project. • Fish farming projects • Rural extension programmes.

  19. OTHER LINKAGES Payments on behalf of Pension Houses - Funds remitted through Natsave by the biggest Public Service Pension organisation. - Other Pension Houses are coming on board. • This will create further capacity to increase savings.

  20. OTHER LINKAGES BEING PURSUED • Agency arrangements with Insurance Companies, for the collection of premiums in rural areas. • Agency arrangements with electricity utility and telecommunications companies, for collection of receivables in rural areas. (iii) Dividends payments to Investors based in rural areas, for listed companies.

  21. WAY FORWARD (i) Bank has planned to open 20 more rural branches in the next five years, starting with 8 next year, 2008. This will increase the reach to the unbanked, as some of the districts targeted do not have a single bank in their area at the moment.

  22. WAY FORWARD (CONT’D) • The Bank is designing more savings products two of which will be launched first quarter of 2008. These will be high yielding with returns linked to the capital market.

  23. WAY FORWARD (CONT’D) • The Real time computer system being acquired will add value to the quality of the Bank’s products. • Tailor made investments and credit products are being designed for small and medium scale enterpreneurs (SMEs) mainly based in rural area END!

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