Publish Date : 18-Dec-2018
A $40 million grant has been approved by the World Bank to support financial inclusion and stability in Mozambique.
This International Development Association (IDA) financing aims to support Mozambiques efforts to increase financial inclusion among underserved groups and small and medium sized enterprises (SMEs), while strengthening the overall financial safety net.
This grant will increase financial inclusion by providing access to electronic transaction accounts to underserved segments of the population.
A transaction account is a first step toward broader financial inclusion as it allows people to store money and send and receive payments.
Broadly, this will be implemented through technical and advisory measures to increase the usage of transaction accounts by facilitating the digitization of government payments and the development of a program to improve the ecosystem for electronic transactions, particularly in rural areas.
World Bank Country Director for Mozambique, Madagascar, Mauritius, Seychelles, and Comoros, Mark Lundell said, Financial sector development is important for economic growth and poverty reduction. I am pleased with the approval of this grant, particularly given its focus on enabling and broadening access for the poor and vulnerable groups as well as facilitating risk management by reducing their vulnerability to shocks.
Lundell also said, This financing will help more individuals and households have access to useful and affordable financial products and services, including basic transaction accounts, that meet their needs.
Lundell further said, This is particularly important in rural areas of Mozambique where individuals can spend as much as a week and the equivalent of 5 days wages just to collect their salary or make an electronic payment.
The project will also support financial literacy and awareness campaigns among potential account holders and businesses, particularly those owned by women, and will finance the creation of a new registry for movable collateral to promote access to finance.
It will support efforts to increase the capacity of the deposit guarantee fund and provide institutional support to improve financial sector supervision and deepen domestic capital markets.
The project is aligned with the first focus area of the Mozambique Country Partnership Framework (2017 2021) that aims to promote diversified growth and enhance productivity through increased access to finance.
It supports the implementation of the Governments Financial Sector Development Strategy for 20132022, which seeks to promote financial sector stability, improve access to financial services and financial inclusion, and increase supply of private capital for development.
It also supports the implementation of the Governments National Financial Inclusion Strategy (NFIS), which seeks to increase access to financial services from 25% to 60% of the adult population by 2022.
Senior Financial Sector Economist and World Bank task team leader for the operation, Julin Casal said, This project will support the Governments efforts to undertake prioritized reforms to deepen financial markets, promote access to essential financial services, enhance financial safety nets and improve supervision of financial institutions in line with national priorities and strategies.
Mozambique has moderated its pace of economic growth, which is now barely above the population growth. Real GDP growth fell from an average of 7% in 2010-15 to 3% in 2016-18.
Lower exports, fiscal consolidation, and tighter monetary policy have contributed to the slowdown, which is expected to continue for the medium term. Growth has not been inclusive and reliance on the extractive and minerals sector is not expected to generate enough income opportunities for the net annual inflow of job seekers.
Efforts to allocate more resources to SMEs and to diversify the economy are necessary to support more inclusive growth.
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