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ZIMBABWE: Banking on a hole in the ground
IRIN News
October 06, 2006

http://www.irinnews.org/report.asp?ReportID=55853

HARARE - Banking facilities remain a pipedream for rural communities, which comprise around 70 percent of the population, a situation described by the Reserve Bank of Zimbabwe as an "unhappy financial exclusion".

"Too many Zimbabweans out there are trapped in excluded financial conditions ... This is a recipe for disaster, because the affected Zimbabweans have fallen hostage to the whims of illegal mini-central banks and parallel market dealings," said Gideon Gono, governor of the Reserve Bank of Zimbabwe, in a statement in late September.

His comments followed visits to rural areas in August to retrieve old bank notes phased out to make way for the new, which lopped three zeros off the old currency to curb inflation. The lack of banking facilities in hard-to-reach rural communities forced authorities to extend the deadline for the surrender of old bearer cheques. Gono alleged that criminals had been taking advantage of rural dwellers in the changeover.

Simpson Mapondera, a communal farmer and shop-owner in Muzarabani in Mashonaland Province, about 70km from Zimbabwe's eastern border with Mozambique in the humid Zambezi valley, sold basic essentials such as soap, bread, cooking oil and sugar, as well as second hand clothing to the impoverished villagers, many of whom had never set foot in an urban centre.

In the absence of a bank, Mapondera kept his earnings in a hole dug in the floor of the thatched hut that served as his makeshift safe. The lack of rural banking facilities could not have hit him harder as he watched his savings go up in smoke when a veld fire burnt down the hut.

"I lost about Z$500,000 [almost US$1,996], which I kept in the hut, anticipating to use it to buy stock for my shop and to purchase inputs for the coming planting season. I might never be able to run the business again," he told IRIN.

Twice a week, Mapondera, who was the envy of surrounding villages because of his shop, would eagerly wait for the only bus to the nearest town, Mount Darwin, about 200 kilometres away, to give the driver money to buy him stock for his business or receive purchased goods.

He said several people from his village were cheated by blackmarket dealers, who dumped large amounts of money in old notes by offering to buy livestock at high prices. This made it difficult for them to exchange the money for the new bearer cheques, because the Reserve Bank had stipulated that individuals had to prove that any amount exceeding Z$100,000 (about US$400) had been acquired legally.

The absence of banks has made life hard for rural communities in many ways. "In the past I have had problems with thieves, who would trace where I kept my money and then steal it, while rodents and termites sometimes eat up the notes. In addition, I often forget how much money I would have saved and, since I resort to hiding it in different places, remembering all the places is a problem," Mapondera said.

"Even if we would want to deposit the money in the banks, the roads are so bad and transport operators shun us. Sometimes we are forced to walk very long distances over several days to go and have our cheques changed into cash," he added.

Small-scale farmers, who sell some of their produce to the Grain Marketing Board, sometimes resort to currency dealers to cash their cheques, who often demand goats for the service.

Mapondera appealed to banks to introduce mobile outreach services, which could also help the farmers raise loans for inputs and equipment.

Gono said the financial exclusion of rural communities had resulted in the "underutilisation of available cash resources", reliance on "brutal loan sharks", aversion to a culture of saving and "lack of investment opportunities" in affected communities.

He announced various measures to address the problem, including a Rural Banking Developmental Programme to set up banks in villages. The Reserve Bank expects the programme to be in place by the end of October and requested the banking sector to extend its social responsibility by establishing financial institutions in rural communities.

However, economist Anthony Mandiwanza said financial institutions would need incentives to venture into rural areas and suggested that development in marginalised areas "through the establishment of small-scale industries" could encourage banking institutions to expand.

Developing infrastructure, such as reliable roads, electricity supply networks, and postal and telephone services in rural areas could also provide incentives to banks.

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