AFRICA RURAL AND AFRICA RURAL AND AGRICULTURAL CREDIT AGRICULTURAL CREDIT ASSOCIATION (AFRACA)ASSOCIATION (AFRACA)

SUB-REGIONAL WORKSHOPSSUB-REGIONAL WORKSHOPS2020THTH-22-22NDND NOVEMBER 2007 NOVEMBER 2007

LEONARD MWANZALEONARD MWANZACEOCEO

NATIONAL SAVINGS AND CREDIT BANKNATIONAL SAVINGS AND CREDIT BANK

RESEARCH TOPICRESEARCH TOPIC

“ “Innovative Approaches inInnovative Approaches in

offering quality Savings offering quality Savings

to the rural poor”to the rural poor”

The case of National Savings andThe case of National Savings and

Credit Bank (NATSAVE)Credit Bank (NATSAVE)

1.1. INTRODUCTIONINTRODUCTION1.1 1.1 ABOUT ZAMBIAABOUT ZAMBIA

Location Location Central AfricaCentral AfricaGeographical AreaGeographical Area 752,614 km752,614 km²²PopulationPopulation 11.5 million11.5 millionPopulation distributionPopulation distribution 56% live in rural areas56% live in rural areas

44% live in urban areas44% live in urban areasInflation rateInflation rate 9%9%GDPGDP US$4.346 Billion US$4.346 Billion Major ExportsMajor Exports CopperCopper

1.21.2 ABOUT NATIONAL ABOUT NATIONAL SAVINGS SAVINGS & CREDIT & CREDIT BANK BANK (NATSAVE)(NATSAVE)

1.2.11.2.1 FORMATIONFORMATIONNATSAVE was established in 1972 through NATSAVE was established in 1972 through

an an Act of Parliament. This followed economic Act of Parliament. This followed economic reforms of 1968 which embraced development reforms of 1968 which embraced development of of rural banking. Hence ownership is vested in rural banking. Hence ownership is vested in Government under Ministry of FinanceGovernment under Ministry of Finance

1.2.21.2.2 BRANCH NETWORKBRANCH NETWORK- - Bank has 26 branches and is represented in Bank has 26 branches and is represented in

all all the provincial centres the provincial centres- Fifteen (15) of the branches are in the rural - Fifteen (15) of the branches are in the rural areas. areas.

ABOUT NATIONAL SAVINGS AND ABOUT NATIONAL SAVINGS AND CREDIT BANK (NATSAVE) (CONT’D)CREDIT BANK (NATSAVE) (CONT’D)

1.2.31.2.3 RATINGRATINGNATSAVE is rated fourth most used Bank by the NATSAVE is rated fourth most used Bank by the

adult adult population in Zambia (Finscope, 2006 Survey).population in Zambia (Finscope, 2006 Survey).

1.2.41.2.4 INSTITUTIONAL DEVELOPMENT PLANINSTITUTIONAL DEVELOPMENT PLANGovernment has endorsed and pledged to supportGovernment has endorsed and pledged to support

NATSAVE’s Institutional Development Plan (IDP), a NATSAVE’s Institutional Development Plan (IDP), a strategic document with a strong focus on rural banking strategic document with a strong focus on rural banking strategies and covers the next 10 years.strategies and covers the next 10 years.

2.2. INNOVATIONSINNOVATIONS2.12.1 BRANCH NETWORK EXPANSION BRANCH NETWORK EXPANSION

PROGRAMMEPROGRAMME

- More branches opened in the rural - More branches opened in the rural areas to areas to increase the Bank’s reach to increase the Bank’s reach to rural rural communities.communities.

- - Accessibility to the rural unbanked Accessibility to the rural unbanked communities has been increased.communities has been increased.

CHALLENGESCHALLENGES

(a)(a) RentalsRentals

All the 15 rural branches are housed in rented All the 15 rural branches are housed in rented properties. Landlords’ perception results in properties. Landlords’ perception results in

frequent increases in rentals, hence reducing frequent increases in rentals, hence reducing Bank’s profitability.Bank’s profitability.

Bank strategically acquiring premises in Bank strategically acquiring premises in economically viable rural areas, for good economically viable rural areas, for good business business levels to cover rental costs.levels to cover rental costs.

CHALLENGES (CONT’D)CHALLENGES (CONT’D)(b)(b) Rural Infra-structureRural Infra-structure

(i)(i) Road NetworkRoad Network- Poor road networks- Poor road networks- Cash transportation highly risky and- Cash transportation highly risky and expensive expensive- In mitigation, Bank has increased - In mitigation, Bank has increased cash holding limits for rural branches, cash holding limits for rural branches, hence reducing on number of runs hence reducing on number of runs..

CHALLENGES (CONT’D)CHALLENGES (CONT’D)(ii)(ii) Water and ElectricityWater and Electricity

- Supplies unreliable- Supplies unreliable- Bank partnering with rural - Bank partnering with rural communities for contingency communities for contingency

supplies of water & electricitysupplies of water & electricity

(iii)(iii) TelecommunicationsTelecommunications- Expensive and unreliable- Expensive and unreliable- Bank is upgrading its computer - Bank is upgrading its computer

system to a real time banking system system to a real time banking system via intranetvia intranet

2.22.2 PRODUCTSPRODUCTSTailor-made products have been designed, specifically toTailor-made products have been designed, specifically tosuit the rural poor.suit the rural poor.

(a)(a) Rural Savers AccountRural Savers Account- Suitable for non-salaried rural savers- Suitable for non-salaried rural savers- Low minimum balance – K20,000 (US$5)- Low minimum balance – K20,000 (US$5)- No charges- No charges

(b)(b) Pensioners AccountsPensioners Accounts- For pensioners only- For pensioners only- Low minimum balance – K5,000 (US$1)- Low minimum balance – K5,000 (US$1)- No monthly charges.- No monthly charges.

2.22.2 PRODUCTS (CONT’D)PRODUCTS (CONT’D)(c) (c) Market AccountMarket Account

- Low minimum balance K5,000 (US$1)- Low minimum balance K5,000 (US$1) - Suitable for people conducting business in markets- Suitable for people conducting business in markets - Customers qualify for group or individual loans- Customers qualify for group or individual loans - Flexible security- Flexible security

(d) (d) Ordinary Savings AccountOrdinary Savings Account- For both urban and rural customers- For both urban and rural customers- Suitable for small savers- Suitable for small savers- Low minimum balance- Low minimum balance- Withdrawals allowed every 7 days- Withdrawals allowed every 7 days- Minimal charge per month- Minimal charge per month

2.22.2 PRODUCTS (CONT’D) PRODUCTS (CONT’D)(e)(e) Regular Savings AccountRegular Savings Account

- Low minimum balance- Low minimum balance- Withdrawals only allowed twice a year- Withdrawals only allowed twice a year- No charge- No charge

(f)(f) Fixed Deposit AccountsFixed Deposit Accounts- For personals, corporates, institutions - For personals, corporates, institutions

etcetc- For 30, 60, 90,180,365 days- For 30, 60, 90,180,365 days- Interest is negotiable- Interest is negotiable

2.22.2 PRODUCTS (CONT’D) PRODUCTS (CONT’D)

Natsave’s current deposit base stands at K104 Natsave’s current deposit base stands at K104

billion (US$28M). The fifteen rural branches billion (US$28M). The fifteen rural branches

account for 41% of the total deposits. Total account for 41% of the total deposits. Total

number of accounts stands at 117,065 of which number of accounts stands at 117,065 of which

44,357 are rural based and 72,708 urban based.44,357 are rural based and 72,708 urban based.

3.03.0 PRODUCTQUALITY/ PRODUCTQUALITY/ COMPARATIVE ANALYSISCOMPARATIVE ANALYSIS

On average, Commercial Banks in ZambiaOn average, Commercial Banks in Zambia

demand minimum balances of between K50,000 demand minimum balances of between K50,000

(US$15) and K1 million (US$250), with monthly (US$15) and K1 million (US$250), with monthly charges ranging from K10,000 (US$2) to charges ranging from K10,000 (US$2) to

K50,000 (US$12). {Bank of Zambia 10/09/07}.K50,000 (US$12). {Bank of Zambia 10/09/07}.

Comparatively, Natsave’s quality of savings Comparatively, Natsave’s quality of savings products is superior both in terms of suitability products is superior both in terms of suitability and affordability.and affordability.

4.04.0 CONSTRAINTS CONSTRAINTS

Despite the above merits, constraints still exist.Despite the above merits, constraints still exist.

Rural people are cautious in letting others have Rural people are cautious in letting others have

their money. Safety, continuity and secrecy are their money. Safety, continuity and secrecy are

some of the factors that foster confidence some of the factors that foster confidence

(Padmanbhan, 1996)(Padmanbhan, 1996)

5.05.0 STRATEGIES TARGETED STRATEGIES TARGETED AT THE UNBANKEDAT THE UNBANKED

- Sponsoring traditional ceremonies and Sponsoring traditional ceremonies and interacting with Chiefs, who are opinion interacting with Chiefs, who are opinion leadersleaders

- Participating in local events.Participating in local events.

- Lending to teachers in rural areas. These serve Lending to teachers in rural areas. These serve as first centres of information and are able to as first centres of information and are able to disseminate positive information about the disseminate positive information about the Bank.Bank.

5.05.0 STRATEGIES TARGETED STRATEGIES TARGETED AT AT THE UNBANKED (CONT’D)THE UNBANKED (CONT’D)

- General sensitisation programmes through General sensitisation programmes through radio programmes in local languages in radio programmes in local languages in various community radio stations.various community radio stations.

- The Bank has created money windows The Bank has created money windows under which branches have specific days under which branches have specific days when they visit markets to collect deposits. when they visit markets to collect deposits. This enables marketeers who may not have This enables marketeers who may not have time to come to the Bank, have the time to come to the Bank, have the opportunity to save.opportunity to save.

-- Cross selling of the money transfer service Cross selling of the money transfer service to customer and non customer.to customer and non customer.

LINKAGES WITH AGRICULTURAL INSTITUTIONS LINKAGES WITH AGRICULTURAL INSTITUTIONS AND NON-GOVERNMENTAL INSTITUTIONSAND NON-GOVERNMENTAL INSTITUTIONS

- Payments for the purchase of crops by Payments for the purchase of crops by Government, particularly maize, rice, Government, particularly maize, rice, cassava.cassava.

- Fertiliser support programmes by Fertiliser support programmes by Government for farmers.Government for farmers.

- Donor funded poultry projects.Donor funded poultry projects.- Cotton Project.Cotton Project.- Fish farming projectsFish farming projects- Rural extension programmes.Rural extension programmes.

OTHER LINKAGESOTHER LINKAGES

Payments on behalf of Pension HousesPayments on behalf of Pension Houses

-- Funds remitted through Natsave by the biggest Funds remitted through Natsave by the biggest Public Service Pension organisation.Public Service Pension organisation.

- - Other Pension Houses are coming on board.Other Pension Houses are coming on board.

- This will create further capacity to increase This will create further capacity to increase savings.savings.

OTHER LINKAGES BEING OTHER LINKAGES BEING PURSUEDPURSUED

(i)(i) Agency arrangements with Insurance Agency arrangements with Insurance Companies, for the collection of premiums in Companies, for the collection of premiums in rural areas.rural areas.

(ii)(ii) Agency arrangements with electricity utility Agency arrangements with electricity utility and telecommunications companies, for and telecommunications companies, for collection of receivables in rural areas.collection of receivables in rural areas.

(iii)(iii) Dividends payments to Investors based in Dividends payments to Investors based in rural areas, for listed companies.rural areas, for listed companies.

RURAL BRANCHES-ADVANCES & DEPOSITS IN BILLIONS

0

1

2

3

4

5

6

7

8

9

10

CHAMA

CHIPATA

CHONG

WE

KAPUTA

KASAMA

KASEMPA

LUW

INGU

MANSA

MONGU

MPOROKO

SO

MUM

BWA

NCHELENG

E

PETAUKE

SOLWEZI

ZAM

BEZI

BRANCHES

AD

VA

NC

ES

/DE

PO

SIT

S

DEPOSITS

ADVANCES

URBAN BRANCHES-ADVANCES & DEPOSITS IN ZMK BILLIONS

0

2

4

6

8

10

12

CHAWAM

A

CHILENJE

CHIMW

EMW

E

KABWE

KITW

E

LIVIN

GSTONE

LUANSHYA

LUSAKA M

AIN

LUSAKA N

ORTHEND

MATE

RO

NDOLA

BRANCHES

AD

VA

NC

ES

& D

EP

OS

ITS

DEPOSITS

ADVANCES

DISTRIBUTION BY NUMBER OF ACCOUNTSRURAL & URBAN

60%

40%URBAN

RURAL

LOAN DISTRIBUTION - URBAN & RURAL BRANCHES

67%

33%

URBAN

RURAL

DEPOSIT DISTRIBUTION - URBAN AND RURAL

56%

44%URBAN

RURAL

WAY FORWARDWAY FORWARD(i)(i) Bank has planned to open 20 Bank has planned to open 20

more rural branches in the more rural branches in the next next five years, starting with five years, starting with 8 next 8 next year, 2008. This will year, 2008. This will increase the increase the reach to the reach to the unbanked, as some of unbanked, as some of the the districts targeted do not have districts targeted do not have a a single bank in their area at single bank in their area at the the moment.moment.

WAY FORWARD (CONT’D)WAY FORWARD (CONT’D)(ii)(ii) The Bank is designing more The Bank is designing more

savings products two of savings products two of which which will be launched first will be launched first quarter of quarter of 2008. These will 2008. These will be high yielding be high yielding with returns with returns linked to the capital linked to the capital market.market.

WAY FORWARD (CONT’D)WAY FORWARD (CONT’D)(iii)(iii) The Real time computer system being The Real time computer system being

acquired will add value to the quality of the acquired will add value to the quality of the Bank’s products.Bank’s products.

(iv)(iv) Tailor made investments and credit products Tailor made investments and credit products are being designed for small and medium are being designed for small and medium scale enterpreneurs (SMEs) mainly based in scale enterpreneurs (SMEs) mainly based in rural arearural area

END!END!