NAME ; TAPIWANASHE T GUMBOCHUMA

PROGRAM ; HBBSFINB
COURSE ; BANKING THEORY AND
PRACTICE

REG NUMBER ; R192160E

LECTURER ; E. MUNDINGI
ASSIGNMENT 1

1a. Using examples, discuss comprehensively the role of banks in developing countries
such as Zimbabwe (12)

Banks play a pivotal role in developing countries. They help in monetary policy that is
regulation of interest rates and money supply. The commercial banks aid economic
development of a country by following the monetary policy of the Central Bank .The
Central bank relies on these commercial banks for the success of the monetary
management in keeping with the requirements of a developing country.

Furthermore, banks help in financing internal and external trade. They aid in the
movement of goods from one place to another by providing different types of facilities
for example providing overdraft facilities and discounting and accepting bills of
exchange. They help in financing both imports and exports of developing countries. Not
only that, the banks provide loans to retailers and wholesalers to stock goods in which
they deal.

Banks also help developing countries in mobilizing savings for capital formation .A
developing country requires a higher rate of savings and capital formation. Many people
in these developing countries have very little income but banks can play a significant
role by introducing a number of attractive deposit schemes to suit the needs of
individual depositers for example monthly income deposits, cumulative deposits and
pension deposit. The development of a sound system of banks is essential to mobilize
dormant savings and to make them readily available to entreprenuers for productive
purposes.

Subsequently, banks can also help developing countries by promoting growth with
stability. In a developing economy, growth with stability is considered as the right
objective to be pursued. An economy cannot grow without stability as this should go
hand in hand. As bank credit constitutes major part of a country’s money supply, banks
can play a pivotal role in stabilizing for example the internal price level, that is inflation.

Holding of stocks can be discouraged, hoaders should not be accommodated and the
genuine need of economy can be met by banks for this purpose.

In addition, banks help developing countries in the development of the right types of
industries by extending loan to right type of persons. By this, they help not only for
industrialization of the country but also for the development of the country
economically. They grant loans to manufacturers who goods and services are in great
demand. In turn, the manufacturers increase their goods by introducing new methods
of production and aid in raising the country’s national income.

b. Analyse the strategies the RBZ is taking to promote financial inclusion (13)

Financial inclusion is the availability and equality of opportunities to access financial

services and access appropriate, affordable and timely financial products and services
which include loan, banking, equity, payment systems,pensions and insurance products.
Globally, policy makers are increasingly embracing financial inclusion initiatives to foster
inclusive economic growth and social development. Financial inclusion enables the
achievement of the sustainable development goals which aid in ending poverty.

The Reserve Bank of Zimbabwe is taking a number of strategies to promote financial

inclusion. It seeks to doing this for SMEs by promoting value chain financing models by
banks and other lenders to enhance more business opportunities for small to medium
enterprises. It also seeks to do this for SMEs by developing programmes aimed at
capacitating SMEs and stimulate their financial and entrepreneurial skills to effectively
manage their businesses. It also seeks to help SMEs by facilitating capacity building
programs for financial insitutions to enable them to develop constructive and more
financial products for SMEs.

Furthermore it seeks to promote financial inclusion of women by facilitating enhanced

participation of women in the development and growth of the country through
prioritizing potential women entreprenuers in respect of SMEs credit payments. The RBZ
also enhance financial inclusion of women by raising awareness of financial services and
products among women through financial literacy programs and education.

For the rural folks, the Reserve Bank of Zimbabwe seeks to implement measures aimed
at enhancing financial access in rural areas by ensuring building and developing
financial instituitions and increase the presence of formal instituitions. Those financial
institutions in rural areas should implement methods suitable for the rural people and
also introduce consumer education for those who are financially illiterate. The RBZ also
will be in collaboration with other financial institutions and other stakeholders to
increase access points in these areas.

In addition,the Reserve Bank of Zimbabwe also seeks to aid financial inclusion in the
Agricultural sector by establishing a fund with the assistance of international
development financial institutions to finance agricultural activities with more focus on
small scale farmers which are mostly financially excluded. Moreover, it seeks to grant
loans to agriculture and affordable interest rates and collateral substitutes to cushion
participating financial institutions’ risk. The Reserve Bank of Zimbabwe will collaborate
with the Ministry of Agriculture, Ministry of Lands and Rural Resettlement , Ministry of
Environment Water and Climate, financial institutions and development agencies to
ensure that ideal and coordianated strategies are implemented to enhance rural and
agricultural finance in Zimbabwe through insurance models and innovative financing.
Moreover, the Reserve Bank of Zimbabwe also seeks to promote financial inclusion for
the youth by incorporating financial literacy programs for these youths and this includes
making compulsory financial literacy programs and courses in primary, secondary and
tertiary levels.It also seeks to achieve financial inclusion for the youths by establishing a
youth empowerment window by all financial institutions which develop constructive
products that address the special needs of youths. Furthermore, by making sure that
regulatory frameworks and policies are youth friendly and protects the rights of youths
so as to increase youth financial inclusion.

The Reserve Bank of Zimbabwe will also promote financial inclusion by developing a
comprehensive and harmonized and legal regulatory framework for financial consumer
protection including market conduct supervision and also develop a National Financial
Literacy strategy in collaboration with other stakeholders.

However, there are also barriers to financial inclusion across the financial sector. These
include low disposable income levels, absence of co ordinated national policy and
strategy on financial inclusion, poor infrastructure in rural areas leading to financial
institutions’ reluctance to establish branches, financial illiteracy, absence of robust credit
informations systems, illiquidity of the local market, lack of investor protection and
undeveloped secondary market among others but a few.
REFERENCES

1.Allen,Carletti & Gu (2015)

2.Lamberg, S, & Valming, S. (2009). Impact of liquidity management.,Vol 14 no.2,

3.National Financial Inclusion Strategy., (Sep 2016)

4.Bhunia, A. (2010). International journal of research in commerce and management,

volume-1,issue-5(sep,2010).pp.9-21