With the support of the World Bank, Mozambique will increase inclusion and financial stability

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With the support of the World Bank, Mozambique will increase inclusion and financial stability

4:46 CAT | 20 Dec 2018

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The Board of Executive Directors of the World Bank Group approved a US$ 40 million grant to support financial inclusion and stability in Mozambique. This funding from the International Development Association (IDA) aims to support Mozambique’s efforts to increase financial inclusion among the most deprived groups and small and medium-sized enterprises (SMEs), while strengthening the global financial security network.

Mozambique moderated its pace of economic growth, which is now slightly above population growth. Real GDP growth has fallen from an average of 7% in 2010-15 to 3% in 2016-18. The reduction of exports, fiscal consolidation and tighter monetary policy have contributed to the slowdown, which is expected to continue in the medium term. Growth was not inclusive and dependency on the extractive and mineral sector is not expected to generate sufficient income opportunities for the net annual influx of jobseekers. Efforts to allocate more resources to SMEs and to diversify the economy are needed to support more inclusive growth.

“The development of the financial sector is important for economic growth and poverty reduction. I am pleased with the approval of this grant, particularly because of its focus on enabling and extending access for the poor and most vulnerable groups, as well as facilitating risk management, reducing their vulnerability to shocks, “said Mark Lundell, Director from the World Bank to Mozambique, Madagascar, Mauritius, Seychelles and the Comoros. “This funding will help more individuals and families gain access to useful and affordable financial products and services, including basic transaction accounts, that meet their needs. This is particularly important in rural areas of Mozambique, where people can spend up to a week or the equivalent of 5 days’ wages, just to receive their wages or make an electronic payment. ”

This donation will increase financial inclusion, providing access to e-transaction accounts for the poorest segments of the population. A transaction account is the first step toward broader financial inclusion by allowing people to raise money, send it, and receive payments. Overall, this will be implemented through technical and advisory measures to increase the use of transaction accounts, facilitating the digitization of government payments and the development of a program to improve the ecosystem for electronic transactions, particularly in rural areas. The project will also support financial literacy and awareness-raising among potential account holders and businesses, particularly those owned by women, and will also finance a new registry of mobile guarantees to promote access to finance. It will support efforts to increase the capacity of the deposit guarantee fund and provide institutional support to improve the supervision of the financial sector and deepen internal capital markets.

The project is aligned with the first focus area of the Mozambique Partnership Framework (2017-2021), which aims to promote diversified growth and increase productivity through increased access to finance. Supports the implementation of the Government Financial Sector Development Strategy for 2013-2022, which aims to promote stability in the financial sector, improve access to financial services and financial inclusion, and increase the supply of private capital for development. It also supports the implementation of the Government’s National Financial Inclusion Strategy (ENIF), which aims to increase access to financial services from 25 per cent to 60 per cent of the adult population by 2022.

“This project will support the government’s efforts to undertake prioritized reforms to deepen financial markets, promote access to essential financial services, improve financial security networks, and improve financial institutions’ oversight in line with national priorities and strategies,” said. Julián Casal, Senior Financial Sector Economist and Team Leader for the World Bank operation.

Source: World Bank