The imperative for inclusive and more equal societies
As we look at the bigger picture of how National socio-economic progress and prosperity function in relation to corporate and, generally speaking, private sector, progress and growth, we must be reminded of the fact that the two cannot and should not be divorced from one another.
The future and success, even of us as the BIHL Group, is inherently intertwined with that of Botswana. The challenge before us is, I must elucidate once again, not a financial services sector issue alone, but a much wider and indeed more inclusive one. We must treat it as such. The biggest challenge or enemy to progress in this regard remains the hurdle that is the gap and unequal divide when it comes to society – how do we work together to bridge the financial services and indeed equality gap through Botswana? Not just in our cities and economic centres, but across the country as a whole. This is inclusive of remote areas, those often termed as unbanked, not as financially literate or without real and consistent access to a number of financial and social imperatives.
It is our view that the imperative for inclusive and more equal societies remains a key tenet of this, and that financial institutions – regardless of whether we are talking about commercial banks, insurance houses, payment service providers or even all-embracing one multi-service providers, such as bancassurance – are an important pillar and player towards bridging and subsequently closing that gap.
With the exclusion of South Africa, the total insurance penetration in sub-Saharan Africa is approximately only 1 percent of regional GDP. Statistics in this regard for Botswana, as estimates, I mentioned earlier. Let us look at even more contextual data on the imperative for inclusive and more equal societies, and I refer here to the Department of Economic and Social Affairs of the United Nations Secretariat’s report titled “Leaving no one behind: the imperative of inclusive development,” which is a Report on the World Social Situation 2016. Let me quote from the report directly:
“Humankind has achieved unprecedented social progress over the past several decades. Poverty has declined dramatically around the world and people are healthier, more educated and better connected than ever before. However, this progress has been uneven. Social and economic inequalities persist and, in many cases, have worsened.”
It goes on to say that, “Against this backdrop, inclusiveness and shared prosperity have emerged as core aspirations of the 2030 Agenda for Sustainable Development. A central pledge contained in the 2030 Agenda is to ensure that no one will be left behind and to see all goals and targets met for all Nations, peoples and for all parts of society, endeavouring to reach the furthest behind first.”
Promoting social inclusion, according to the report, requires removing barriers to people’s participation, including laws, policies and institutions, as well as discriminatory attitudes and behaviours, taking active steps to make such participation easier. This speaks to the point made earlier on transforming rhetoric into action.
I quote further: “Beyond the foundational role of inclusion and the moral imperative to correct imbalances in power, voice and influence, there are also practical reasons to ensure that no one is left behind. Inclusion strengthens not only the social, but also the economic and environmental dimensions of sustainable development.”
Are we cognisant as a sector of Agenda 2030 and of the normative as well as more unusual things that impact our ability to be inclusive, or indeed barriers to inclusion? For example, issues of education and financial literacy in more remote areas of Botswana, be it education on money matters or language barriers that make such understanding a challenge.
It is now widely accepted that financial inclusion plays a critical role in building a more inclusive society. Financial inclusion helps people to accumulate assets, undertake economic activity, and manage risks. It also helps them to make payments and undertake transactions at a lower cost. But for this to work, financial institutions, markets and regulators must make sure that appropriately designed and priced products and services are available and accessible.
In its 2019 Financial Access Survey Results, released at the end of September 2019, the International Monetary Fund (IMF) noted the following pertinent trends.
TRADITIONAL BANKING IS CHANGING, AND WE ARE SEEING INCREASINGLY THE RISE OF MOBILE AND INTERNET BANKING
“Sub-Saharan African countries have started leveraging the growing mobile money footprint to make inroads into traditional banking. For example, in late 2012, the Commercial Bank of Africa (CBA) and Safaricom in Kenya launched M-Shwari, a bank account with both savings and credit facilities accessed entirely through M-PESA, the mobile money platform.
The Botswana Life Insurance Limited Life Rewards card, I believe is also worthy of mention here as leveraging technology to deliver a more inclusive financial impact. The card, which is underwritten by BancABC and supported by Visa, enables Botswana Life clients to be paid their claims and benefits into the card, then transact with it in the same way as a debit card. The LifeRewards card also has a built-in rewards programme and a low-cost funeral plan with free accident cover for the member. Launched in 2013, it was the first product of its kind to be launched by an insurance company in Botswana and second in Africa, following our neighbours, South Africa.
Platforms from the local telcos are also looking to support in this space – products such as BTC Smega, Orange Money, Mascom MyZaka and PosoMoney, which, I imagine, strive to deliver the same level of impact.
Even Government has gone down this route, with the launch of the Pula Card, a similar pre-paid VISA-branded debit card. This is used to pay social welfare benefits to some recipients. Besides reducing the need for cash and all its associated risks, it provides many low-income, unbanked households with their first formal payments instrument. It therefore provides them with a foothold in the financial services sector and could, potentially, be used to build up a payment history that could in due course unlock access to other financial services.
SMEs ACCESS TO FINANCING LIMITED
Bank financing of small and medium-sized enterprises (SME) remains subdued in many low and middle-income countries. Let us be reminded this looks at a formal banking sector, and not those financiers or funders in the sector outside of formal commercial banks. SMEs have limited access to borrowing despite the fact that SMEs contribute up to 40 percent of National income, creating 70–95 percent of new jobs (World Bank 2019). Bank lending to SMEs has remained stagnant at around 6 percent of GDP over the past 5 years.
Catherine Lesetedi is the Group Chief Executive Officer (CEO) at Botswana Insurance Holdings Limited (BIHL).