Village Banking: A Feasible Tool for Accelerating Financial Inclusion for the Unbanked Poor Communities in Zambia

Abstract

Easy access to financial services is at the core of poverty alleviation for individual, household, community development. One of the major challenges poor communities have been facing in Zambia is lack of access to financial services due to failure to meet the conditionality’s set by the formal financial sector such as collateral on borrowing and high transaction costs. The objective of this research is to assess the feasibility of village banking as a tool to accelerate financial inclusion and subsequently propose it as a strategy to reach “the hard to reach” poor communities in Zambia. The research utilised the literature on village banks as well as the interviews conducted from the key informant and participants in village banks. The literature is based on a wide range of academic literature that documents village or community banks and access to financial services by the poor. The research reveal that with a proper legal and regulatory framework village banks are capable of reaching the “hard to reach” by creating access to basic financial services to the poor communities on a sustainable basis anchoring on mutual trust, relationships, accountability, customs, values and participation. Based on these findings, it is highly recommended that more village banking groups be established and supported by the government and the regulators and used as a financial tool to accelerate financial inclusion to reach the “:hard to reach poor” communities.