Perceptions of post-multicurrency regime financial inclusion confidence challenges in Zimbabwe

Abstract

Aim: The study sought to assess the informal trader’s perceptions of the post-multicurrency regime financial inclusion confidence challenges in Zimbabwe and also through further future studies explore the potential of explicating a framework for achieving optimal financial inclusion in an economy recovering from a recession through further future studies. Setting: A non-probability judgment sample of 1000 informal traders in the Avondale area of Harare was used in this study. Method: The study established four potential financial inclusion construct pillars: demand side factors, supply side factors, behavioural factors and individual factors; these were largely influenced by age, which can be investigated in further future grounded theory studies to develop a framework. Results: The results indicate that healing from the financial experiences of the hyperinflation era of 2008 still has not been achieved. The study suggests a need for Zimbabwe to restore human rights, political stability, and ensure compliance with the Financial Action Task Force regulations regarding money laundering and terror financing in order to boost external confidence in the financial system of the country. Conclusion: There is still a challenge of confidence in the country’s financial system. The proposed framework is envisaged to minimise the negative impacts of the mistrust of formal financial service providers and boost confidence in the financial system. It is hoped that the findings will aid government to craft policies that will be perceived as supportive of the informal sector to achieve optimal financial inclusion. The study further suggests penetration of the rural areas through technological advances such as mobile networks.

Willingness to Formalize: A Case Study of the Informal Micro and Small-Scale Enterprises in Zimbabwe

“…Formalization will facilitate keeping track of accurate statistics. Formality also broadens the tax base, and in certain instances, may lower the tax rates (Ngwenya et al, 2018).…”

“…Literature also identifies financial inclusion as another reason for the need to formalize because it plays a fundamental role in development (Ngwenya et al, 2018). Despite the lack of banking services, most of the informal MSEs in developing countries experience lack of access to other formal financial services such as social and business security insurance services (Kappel and Ishengoma, 2006).…”

“…As a result, their potential for growth is limited because they cannot engage in more risky strategies without protection. According to FINCA (2016) in Ngwenya et al (2018), eighteen percent of MSEs in Zimbabwe used banking and non-banking services. Formalization allows the MSEs to take more risky growth strategies under the cover of liability institutions that can protect them from loss when faced with business failure.…”

“…Institutional asymmetry refers to a state whereby individual morality (norms and values with respect to non-formalization) differs from state morality (the laws and regulations of formal institutions (Williams and Bezeredi, 2018;Williams, 2015). The asymmetry may be caused by poor public services, corruption, instability of the formal institutions or failure by the government to provide support networks necessary for business growth and success, resulting in a lack of trust in the government (Ngwenya et al, 2018;Williams and Bezeredi, 2018;van Rooyen and Antonites, 2007). The mistrust in the government tends to discourage registration leading to the growth of informal sector.…”

“…Although a number of reconstruction exercises were implemented after 2005, including the erection of trading areas by the city council, introduction of entrepreneurship training programs for all by the Ministry of Micro-Small and Medium Enterprises and availing of funds for small businesses in 2010 (which require collateral), recent evidence suggests the government is still struggling to formalize the informal sector (Chigwenya and Mudzengerere, 2013;Dube, 2014;Rogerson, 2016;Ngwenya et al, 2018). The informal sector is regarded as a shadow economy, hence not supported by the government.…”