There are many reasons why poor rural households cannot access the financial services that could improve their lives and livelihoods, and many reasons why financial service providers do not adequately serve this large section of Zambia’s population. Lack of knowledge, understanding and financial confidence among poor, rural consumers combined with the high cost and logistical challenges of serving scattered rural populations exclude many poor people from the financial sector.
Research suggests that financial institutions have a limited understanding of the broad range of consumer needs and the potential for rural financial service delivery. Historically the focus has been primarily on agricultural credit. Efforts to provide rural financial services have often been unsuccessful, chiefly for reasons of poor product design, development and delivery that fails to meet the needs of this very large market segment.
The relatively poor and dispersed nature of the smallholder farmers and rural househoulds and the volatile nature of rural and agricultural livelihoods present considerable challenges for agricultural and rural finance providers. The prohibitively high costs of offering conventional, branch-based services in remote rural areas demands creative thinking and innovation in both products and delivery of those products.
A key step in addressing these issues is to develop the capacity of financial institutions to understand the nature, challenges and opportunities in agricultural and rural financial services and to develop product offerings that take this into account crucially, financial service providers need to freely understand the financial service needs and associated benefits for smallholder farmers and rural households. FSDZ is playing a role in this by acting as a catalyst to effect market change in a sustainable way through investment in infrastructure, coordination, capacity building, advocacy, innovation and information support functions.