. FINANCIAL SECTOR DEVELOPMENT PLAN (FSDP) Presentation at the Agri Business Financial Fair - Choma 2014

. OVERVIEW OF THE FINANCIAL SECTOR DEVELOPMENT PLAN (FSDP) FSDP SECRETARIAT

COUNTRY LANDSCAPE  Total area:752,618 Km Squared  Population:13 million and sparsely populated (Census 2010)  Population Distribution:Rural (62%) Urban (38%)  Gender Distribution:Female (51.3%) Male (48.7%)  Languages: 72 languages  GDP: $20.5 Billion (2012)  GDP Per Capita: $1,473 (2012)  Financial inclusion:37.3%of Zambian adults are financially served leaving 62.7% of adults financially excluded (i.e. using no financial products) 3

To become a prosperous middle income nation by 2030 The National Vision 2030 is Zambia's long-term plan, expressing the country's aspirations up to It articulates development policy scenarios towards the attainment of desirable social economic indicators by The Fifth and Sixth National Development Plans (FNDP and SNDP) set the pace for improving economic infrastructure and investing in human development. Zambia’s Vision 2030

The FSDP is a national strategy to address weaknesses, and aimed at broadening and strengthening Zambia’s financial sector. The FSDP is one of the Governments sector reform programmes which feed into the National Development Plans. The FSDP was approved by Cabinet in 2004 as 5-year programme to address weaknesses in the financial sector. The FSDP was extended for a second phase in January 2010 for 3 years due to outstanding issues & the recent global financial crisis. Financial Sector Development Plan (FSDP)

Low financial intermediation; Lack of financial services in rural/peri-urban areas; High bank charges & account requirements; Poor credit culture; Low levels of financial literacy & education; Lack of long term development & housing finance; Under developed financial markets; & Fragmented (and outdated) financial sector laws. Weaknesses Identified In The Financial Sector

ZAMBIAN FINANCIAL SECTOR- REGISTERED INSTITUTIONS AS AT 31 AUGUST 2014 Type of institutionsNumber Commercial Banks19 Non-Bank Financial Institutions  DFIs  Leasing companies  Microfinance institutions  Savings and credit institutions  Financial businesses  Building societies  Credit reference bureaux  Bureaux de change Payment Systems  PIC and DDACC clearing  Switching services  ZIPSS/ RTGS Payment System Businesses  Mobile payment services  Money transmission services  Prepaid payment card

STATUS OF FINANCIAL INCLUSION IN ZAMBIA  According to the FinScope survey of 2009;  37.3%of Zambian adults were financially served leaving 62.7% of adults financially excluded (i.e. using no financial products);  23.2% of Zambian adults were formally served: 13.9% had a bank account and 9.3% had other formal financial products;  14.1% of Zambian adults informally served only  Access Barriers:  Physical access/ proximity to financial institution (long distances);  Perceived affordability of financial products (cost of services);  Perceived appropriateness of financial products;  Regulatory barriers i.e. KYC requirements imposed by AML Directives 8

The FSDP is coordinated through a number of working groups and a full time Secretariat housed at BoZ. Reports to Ministry of Finance for policy direction with a Steering Committee chaired by the Secretary to the Treasury. FSDP Phase II focuses on 3 main pillars, namely: (i) enhancing market infrastructure; (ii) increasing competition; & (iii) increasing access to finance. Implementation through a full time Secretariat at BoZ with 6 Working Groups. Implementation Committee provides monitoring role. Steering Committee provides policy direction. Implementation Approach of the FSDP

Financial inclusion research using FINSCOPE which has shown increase in financial access from 33.7% in 2005 to 37.3% in Introduction and enhancement of usage of the credit reference bureau to address the poor credit culture. Promotion of bank branches and agencies in all the 103 districts(as at June 2014) of Zambia (including rural areas to support farmers) Currently 19 Districts are not covered by either a commercial bank or NSCB. Review of ‘relaxed’ KYC Guidelines and issuance of Practice Note (in 3 rd quarter of 2011). Awareness programmes for consumers through road shows, as well as print and electronic media. Development of national financial education strategy for Zambia and including the review of the School curricular (last done 1972). FSDP ACTIVITIES & MILESTONES

Development work for a financial identification system using biometrics (in collaboration with Min. of Home Affairs) to facilitate access to financial services without stringent reference documentation and to reduce frauds. Development of a national switch common platforms for transactions on any ATMs, points of sales, etc. Re-categorisation of Microfinance Institutions into either consumer lenders or social-based MFIs with varying regulations. Development of a micro insurance strategy for Zambia. to facilitate access to insurance for MSMEs and low income groups. Modernisation and harmonisation of financial sector laws to protect depositors, for corporate governance & consumer protection. OTHER FSDP ACTIVITIES & MILESTONES

FSDP Spearheaded Reforms which enhance access Financial Services for Farmers Drafting of the Movable Property Collateral Bill o This law once enacted will allow excluded groups such as farmers borrow using valuables such as equipment,livestock and farm produce as collateral Relaxing Know Your Customer (KYC) requirements for opening bank accounts Development of Micro Insurance Strategy to access to insurance for MSMEs,such as farmers, and low income groups

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