Earlier in the year, I had the opportunity to attend a function hosted the central bank, who are also regulators of the banking system in Zambia. Incidentally they are host to the secretariat of the Financial Sector Development Program (FSDP) who among other things is spearheading the program to increase utilization of financial services among people in Zambia. Successive research conducted shows that financial penetration of services in Zambia is just 37%, the lowest in the SADC region. Among the many financial sector issues pursed by FSDP like encouraging banks to expend their branch networks into rural areas, policies that encourage growth of financial products and other incentives, financial inclusion is an agenda that touches on many policy issues that politicians are also spearheading. These include general empowerment of the majority of Zambians particularly women and the youth and their participation through entrepreneurial endeavors.
One cannot realistically talk about empowerment without systematic access to banking services whether for savings, loans or ancillary support like insurance and capital markets; also at 37% penetration as research findings show it makes this problem pervasive and therefore should be everyone’s responsibility to do something, anything about the matter. This is a vicious circle (currently) where low access spirals into financial exclusion. It has to be turned into a virtuous cycle (future) where the 37% is converted to 73% penetration. Given the multi sectoral, cross cultural and social nature of this problem how can the Central Bank (BoZ) in the context of the occasion play a pivotal role?
At the said occasion BoZ was distributing giant piggy banks to selected schools which had been invited. Apparently the BoZ was trying to solve another problem which had arisen in the economy. As overseers for the whole financial sector no doubt they can call on anyone they deem relevant to help them solve an identified problem. In this case, the BoZ had noted that the recently introduced coins after the rebasing of the currency in 2012; the coins has disappeared or their usage was being largely ignored by traders!
Prior to 2012, coinage in our currency had all but disappeared for many years. Other economies where coins are conspicuously absent is Zimbabwe. Someone hinted that disappearance of coins in the economy is a sign of high inflation; high velocity of cash cuts off those very small amounts as the general price levels rise. Zambia’s problem was not only with disuse of coins but also disuse of smaller notes. The most visible note prior to rebasing was the K500 and K1000 notes. Any note lower than these was shunned by traders and in some instances out rightly rejected. So after the successful rebasing of the currency and the introduction of coins, it looks like that problem was rearing its ugly head again. The BoZ had to be in the forefront of the solution.
The only time one encounters coins is when one travels to other countries. Even then the attitude of Zambians is to cast away the coins in a bag and concentrate on the higher value notes. By the time one returns home, it is not surprising for one to find as much as 100-500 of such monies in value in coins strewn between various handbags. In whatever currency those amounts are significant for one to pay for train or bus rides to or from hotels or indeed a generous snack in any airport.
The disregard for coins continues even with our new currency. Coins are heavy and bulky and unfortunately are of lower value. However cumulatively, it can amount to significant amounts that can translate into a decent sum after some time.
The disregard of coins cannot continue.
Zambians must unlearn that lesson and start to look at coins as money that can grow into substantial amounts with passing of time. The BoZ was right in reacting very dramatically to this problem by donating giant piggy banks to schools and encouraging them to fill them up with all the coins that they could find and return the full piggies to the Bank.
It is at this point that I think the Bank missed the opportunity to drive home the point about savings, a topic about which they are interested through the Financial Services Development Program (FSDP). As central Bank they are driving this agenda from the front. As regulator to the banks, they devise policies which are being rolled out to reach as many people as possible through products that commercial banks are offering. They are also particularly focused on women and youth products that they may access as financial services. Various researches undertaken in Zambia on financial inclusion shows that the access levels are still pathetic at below 40% nationwide and of this more that 90% are females and the youth.. Obviously coins collection is one small way in which people can start to save.
The BoZ should have given the giant piggy bank as a symbolic gesture to the schools but should have also given out many other smaller piggy banks which the pupils should have been saving their own coins and those coins that were being thrown about in their homes. Once the small piggies were full, they would have been emptied in the school piggy bank and a record for each pupil would be kept of how much they had collected. Once the school piggy was full, those pupils who had helped to fill it up and had raised the minimum amount to meet the opening balance would be eligible to open accounts at a designated bank and accorded the privilege of going along to the bank to open the account themselves! How the pupils filled up the piggy banks would also be a lesson in work for pay, at home and in the neighborhood, in their own time, in a small way, at home. It would also help pupils in lessons for saving coins from pocket money and generally giving value to money, no matter how small as opposed to the current belief where we think some money especially coins is worthless.
The use of the giant piggy banks by the school as a collection point is ambiguous. Firstly, who will own the money once it had been collected by the school? No doubt once it is handed over to the BoZ they will exchange it for notes, so whose money is that for?
The sustainability of the coins collection is also in doubt as they are supposed to pick these coins from home or ask their parents for the loose change. Most parents I know, me included will not give money to children for nothing. So, since ownership of the money collected is not well defined and also how the coins will be collected is also hazy, the opportunity can be seized to teach pupils about the value of money, the value of work and also the promise of a growing balance if such monies are saved.
The Bank should have used the launch of the piggy banks to describe the basics about saving. First the schools as frontier lines for teaching about savings should have been the custodians of the first efforts of the children to save. They should have encouraged and notified parents about saving small coins in the piggy banks that the children would bring home. They should also have enlightened the children to save some of their pocket money. The coins should not just be collected but should be coins for work. Children can be incentivized in many different ways especially where there are lessons to be learnt. Therefore to engage in community work for purposes of collecting coins so that they are re circulated is a good start. Thereafter young people will see coins and see value.
The schools could run a competition with each other to see which school filled the giant piggy banks first or more times in the year. The coins of course belong to the pupils so they will be incentivized to collect as many as they could through various activities. The coins could then be sent to any bank with the recommendation of the school for such a child to open an account. I can only imagine what this would do to a child; the chance to go to a bank to open an account in his own name?? What a wonderful opportunity and incentive for these children to work harder to earn money that they could save first in the piggy bank and later to the bank.
Therefore, what started off as a problem of disappearing coins has now been converted into a learning exercise for children to save from small amounts.