Banks can help make village banking groups more viable

LUSAKA, ZAMBIA – There is need for village banking groups to form partnerships with formal financial institutions to help hedge against economic shocks that may reduce the groups’ viability, according to Stanbic Bank Head of Personal Business Banking Mwansa Mutati.

Village banking is an important part of the local financial sector that is making significant contributions to the rate of financial inclusion in Zambia - especially among women, said Ms Mutati.

“Village banking has grown so much in this market that it has established itself as a significant preposition in Zambia’s financial inclusion drive as outlined in the National Financial Inclusion Strategy 2017-2022 (NFIS2022).

“As a bank that seeks to see the country’s growth and prosperity trickled down to the individual, we made financial inclusion part of Stanbic Bank Zambia’s growth strategy.

“And because we realise the role village banking plays in the nation’s financial inclusion strategy, we have been supporting various village banking groups through our Chilimba Banking preposition,” she added in the latest of a series of webinars by the bank.

Village banking groups are seldom backed by hard assets or high-tech digital platforms to facilitate complex data management and online transactions. This leaves them vulnerable to economic headwinds and threatens their growth and sustainability.

It is therefore, imperative for such groups to find ways to protect their funds from market volatilities and hedge themselves against economic shocks and currency fluctuations.

The alternative would be for village banking groups to leverage the extensive reach and strength of more sophisticated digital platforms and money management facilities from formal financial institutions that would complement their operations and make attaining their group goals more efficient and resilient against external shocks - like the kind caused by the COVID-19 outbreak, she explained.

“The Chilimba account is tailor-made to support village banking from a savings, bookkeeping and sustainability perspective. Being the largest bank in Zambia, we are better able to absorb negative impacts from economic cycles – and this stability is extended to our clients and partners,” says Ms Mutati.

Meanwhile, Information Communications Technology expert Susan Mulikita says village banking groups are not as archaic as most people believe adding that they are run by sophisticated members of society and play a significant role in maintaining positive cashflow in several local businesses in the face of external shocks.

She explains that village banking groups provide easy access to financial services and easier access to loans compared to formal financial institutions.

“However, there is more to be done to make village banking more attractive to modern entrepreneurs, particularly women. By partnering with established financial institutions, the groups can utilise their services and assets to serve as a buffer against economic disruptions like the kind caused by COVID-19.”

Mrs Mulikita, who was named the Stanbic Anakazi Woman of the Year earlier this year, noted that “If we could have more village banking groups partnering with institutions like Stanbic Bank Zambia and exploiting their services to make the group’s transactions and operations more efficient and transparent, we would see more businesswomen join such groups to further their businesses because they would know that the venture is backed by a stable bank.

“We have seen multiple businesses thrive from the money they borrow from village banking and we hope to see more people utilise these groups to secure their financial future.” Stanbic Bank’s webinar on village banking and financial inclusion is on Facebook at https://www.facebook.com/stanbicbankzambia/posts/2555796778082093