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Chapter 8. Financial Inclusion in Mozambique

Doris Ross, Victor Lledo, Alex Segura-Ubiergo, Yuan Xiao, Iyabo Masha, Alun Thomas, and Keiichiro Inui
Published Date:
May 2014
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Felix F. Simione and Yuan Xiao 

Access to finance remains problematic in Mozambique. According to the FinScope 2012 survey, 75 percent of micro, small, and medium-sized enterprises (MSMEs) are financially excluded—that is, they do not use any formal or informal financial products or services (FinMark Trust, 2013). This stands in contrast to the rapid expansion of Mozambique’s banking system and microfinance institutions over the past decade. This chapter examines existing statistical evidence and studies in order to analyze the extent to which Mozambique has experienced an increase in financial inclusion in recent years; the factors that constitute binding constraints to financial inclusion; and the policy actions that can be implemented to further broaden access to finance.

A discussion of financial inclusion is against a backdrop of two policy developments in Mozambique. First, the Mozambican authorities are reorienting their policies toward making economic growth more inclusive, with financial inclusion increasingly regarded as a key pillar of inclusive growth policies. Second, since the approval of the Financial Sector Development Strategy in early 2013, the authorities have been designing a financial inclusion strategy to bring more households and businesses into the formal financial system.

Recent Trends and Challenges

In general, financial inclusion refers to a process that ensures the ease of access, availability, and usage of the formal financial system for all members of an economy (Sarma and Pais, 2011). It facilitates the efficient allocation of productive resources in an economy and thus contributes to economic growth, and also benefits the welfare of individuals by providing financial services. Thus, a high degree of financial inclusion is associated with an advanced stage of economic development and social inclusion, while also enhancing the effectiveness of monetary and financial policies.

Measures of financial inclusion score a country across a range of dimensions for providing access to and use of financial services and products. For example, the Bank of Mozambique uses the indicators shown in Table 8.1 to measure financial inclusiveness and to construct its index of financial inclusion.

Table 8.1.Bank of Mozambique Financial Inclusion Index
D1. Geographic AccessD2. Demographic AccessD3. Use
1. Number of agencies (banks, micro banks and credit cooperatives) per 10,000 km21. Number of agencies (banks, micro banks and credit cooperatives) per 100,000 adults1. Deposits (volume) per 100,000 adults (proxy used): deposits (value) per GDP
2. Number of microcredit operators and savings and loan organizations per 10,000 km22. Number of microcredit operators and savings and loan organizations per 100,000 adults2. Credit (volume) per 100,000 adults (number of loan contracts per 100,000 adults)
3. Number of electronic money institution agents per 10,000 km23. Number of electronic money institution agents per 100,000 adults3. Credit (value) per GDP
4. Number of ATMs per 10,000 km24. Number of ATMs per 100,000 adults
5. Number of POS per 10,000 km25. Number of POS per 100,000 adults
Source: Bank of MozambiqueNote: ATMs = automated teller machines; POS = point of sale terminals.
Source: Bank of MozambiqueNote: ATMs = automated teller machines; POS = point of sale terminals.

Although standard definitions of financial inclusion focus on demand-side indicators, this chapter also includes supply-side perspectives. The supply-side analysis builds mainly on the 2013 study by the Bank of Mozambique on financial inclusion, while the demand-side analysis is based on results from FinScope,1 a (nationally representative) 2012 survey of MSMEs.

Supply-Side Trends

From a supply-side perspective, there is some evidence of improvements in terms of geographic and demographic coverage by financial institutions in Mozambique. The Bank of Mozambique study found that the index of financial inclusion, measured as the level of access to formal financial services on a 0–100 scale, rose from 9.2 in 2005 to 13.1 in 2012. This arguably reflects the growing number of banks and branches in urban areas, some of which experienced a rapid expansion toward rural areas. In fact, the number of branches of credit institutions rose from 228 in 2005 to 502 in 2012 (Figure 8.1). This allowed a wider geographic coverage of banks, with the number of entities per 10,000 km2 increasing from 2.9 in 2005 to 6.6 in 2012.

Figure 8.1.Banking Expansion and Financial Deepening

Source: Bank of Mozambique.

However, while Maputo city had a very high index of financial inclusion at end-2012 (91.8), other provinces remained with very low access to financial services (Figure 8.2). As proposed in Sarma (2012), countries with an index of financial inclusion value less than 30, which would include Mozambique,2 are regarded as low financial inclusion countries. In practice, this means that, on average, those countries have access to relatively fewer financial services and products (bank branches, automated teller machines, point of sale terminals, etc.) per standardized geographic area and adult population. A look at the financial inclusion index computed in Sarma (2012) suggests that in 2010 Mozambique’s index outperformed those of Angola and Madagascar, but performed poorly compared to those of Seychelles, South Africa, and Botswana (Figure 8.3).

Figure 8.2.Index of Financial Inclusion by Province, 2012

Source: Bank of Mozambique.

Figure 8.3.Financial Inclusion Index for Selected African Countries

(0–100 scale)

By end-2012, the Mozambican financial sector consisted of 18 banks, eight microbanks, seven credit unions, 11 savings and loans organizations, 202 microcredit operators, one electronic money institution, and 3,051 mobile banking agents. Financial depth—defined as the ratio of private sector credit to GDP—jumped from 13.2 percent in 2005 to 28.8 percent in 2012 (Figure 8.1). The ratio of broad money to GDP also increased notably, from 28.9 percent in 2005 to 45.6 percent in 2012. However, financial deepening has been heavily biased: while the credit-to-GDP ratio increased remarkably, the credit boom has mostly been financing household consumption and services, at the exclusion of agriculture and industry, which together employ over 80 percent of the labor force (Figure 8.4).

Figure 8.4.Credit to the Economy

(Constant 2010 prices; billions of meticais)

Sources: Bank of Mozambique; and author’s calculations.

Demand-Side Trends

A look at demand-side indicators finds some improvements over time, but overall financial inclusion is still very limited. While the share of adults holding at least one deposit account increased from 6 percent in 2005 to 20 percent in 2012, the share of adults holding at least one credit account is much lower, increasing from 0.3 percent to only 3.9 percent in the same period (Bank of Mozambique, 2013). At the same time, the 2012 FinScope survey found that only 25 percent of MSME owners used financial products or services to manage their businesses, and only 11 percent of MSME owners used some form of formal financial service. Similarly, an earlier FinScope survey of consumers (conducted in 2009) found that only 22 percent of households used financial products or services to conduct their personal finance (Figure 8.5).

Figure 8.5.Access to Financial Services

(Percent of sample)

Sources: 2009 and 2012 Finscope MSME Surveys.

Note: MSME = micro, small, and medium-sized enterprises.


Thus, while the supply of bank services increased remarkably in recent years, the use of those services does not appear to have been very inclusive. At the margin, credit is absorbed more by households than any productive sector. As a starting point for analysis, there are four possible explanations for this situation:

  • Incomes in rural areas are too low and irregular. The expansion of banks into rural areas helps promote financial inclusion, but is limited by the low level and uncertainty of rural household incomes, which remain below subsistence levels. Indeed, according to the FinScope 2012 survey, problems related to low and irregular incomes prevented 55 percent of MSMEs from opening a bank account.
  • Population density is low, especially in rural areas. Even when the unbanked have bankable incomes, the logistical costs of opening bank accounts are high. Population density is very low in Mozambique compared to other countries, which implies that bank customers must cover long distances and face related costs to reach a branch. The FinScope survey revealed that 63 percent of MSME owners in rural areas have to travel more than one hour to get to the nearest bank (Figure 8.6). In fact, “banks are too far” is the second most-mentioned (19 percent of MSME owners) barrier to financial inclusion. From a financial inclusion perspective, this means that the marginal contribution of a new branch in terms of reaching new (previously unbanked) customers is likely to be low in Mozambique.
  • Access to bank financing is too costly. Interest rates on bank loans, despite having declined over recent years, are still high in Mozambique. Only 5 percent of MSME owners borrowed money or had taken goods on credit for business purposes in the 12 months before the FinScope Survey, or were repaying or owing money/goods for their business. Of those 5 percent, only 1 percent borrowed from a commercial bank. Many MSME owners (42 percent) did not borrow mainly for fear of not being able to pay the loan back. Thus, the large increase in private sector credit observed over recent years is not for financing small businesses in rural areas, but rather for existing customers in urban areas, including household consumption.
  • Big banks lack expertise to deal with local MSMEs. Another factor slowing financial inclusion, particularly when it comes to access to credit, is that most banks’ business models require standard conditions for credit that most MSMEs are unable to meet. As evidenced in the FinScope survey, while 87 percent and 46 percent of MSMEs would meet the requirements of being in operation for more than a year and having collateral, respectively, only 6 percent have formally registered their business, only 2 percent have a business plan, and few companies (18 percent) keep financial records. Thus, from a traditional banking approach, MSMEs are perceived as risky and hence usually fail to access bank loans.

Figure 8.6.Distance from Businesses to Banks

(Percent of MSME owners)

Source: Finscope 2012 MSME Survey.

Note: MSME = micro, small, and medium-sized enterprise owners.

Government Reform Program: 2013–22 Financial Sector Development Strategy

The Mozambican government approved a Financial Sector Development Strategy for 2013–22 (FSDS) in early 2013 that aims to remove the main obstacles for formal financial services to reach the broader population. One of the pillars of the FSDS is to improve financial access and support inclusive growth. The government identified several possible policy actions to support that effort:

  • Promote competition in the banking sector. Interest rates on loans would likely be much lower if the Mozambican financial system were more competitive. The fact that the top three banks in Mozambique account for more than 80 percent of banking system assets indicates the significant market power of those banks. More competition among banks could help bring interest rates down and diversify the range of financial services available to customers.
  • Foster mobile banking. The relatively high transaction costs Mozambicans face to reach a bank branch, especially in rural areas, can be dramatically reduced through the use of mobile banking services. Since mobile phones have become available to many Mozambicans, mobile banking could give rural customers access to basic financial products such as deposits at a low cost (see Box 8.1). The effectiveness of mobile banking in reaching the unbanked depends in part on the regulatory framework in place. Some evidence suggests that regulations that promote an open and level playing field are more likely to yield better outcomes (di Castri, 2013). It is therefore important that the authorities develop the regulations governing mobile financial services based on best international practices.
  • Improve the bank–MSME linkage. Given that most banks’ business models are not tailored to MSMEs, two policy actions can be considered. Programs could be designed to increase the capacity of financial institutions to serve the MSME market segment, but this could distort financial markets. Instead, actions could be implemented to strengthen MSMEs’ ability to apply for credit. These actions include establishing a moveable collateral registry that could help MSMEs secure collateral, and creating private credit registry bureaus that, by providing banks with information on borrowers’ profiles, would facilitate risk assessment. The role of private credit bureaus in increasing access to finance is well acknowledged in sub-Saharan Africa (Triki and Gajigo, 2012).

Box 8.1.Mobile Banking in Mozambique

  • Mobile banking is emerging in Mozambique. There are currently two mobile banking operators in Mozambique—mKesh and m-Pesa—licensed in 2010 and 2013, respectively. These operators have so far reached over 150,000 customers and are expanding rapidly.
  • There is a great opportunity to reach the unbanked through mobile banking. The problem of access to banks in rural areas could be overcome by enabling households to access phone-based accounts. The accounts currently offered by mKesh and m-Pesa allow for deposit withdrawals and money transfer and payments.
  • Financial literacy has increased in areas served by mobile banking. There is substantial use of these services in southern Mozambique, where financial literacy and trust outcomes were positively affected by the introduction of mobile banking (Batista and Vicente, 2012). The marginal willingness to remit was increased by the availability of mobile money. Also, mobile money has substituted traditional alternatives for both savings and remittances.
  • Looking forward, it is necessary to establish the legal framework for mobile banking. The success of mobile banking in reaching the unbanked will partly depend on market-friendly regulation. The Bank of Mozambique is working on this. Issues such as interoperability of mobile phone networks, which allows money transfer between different mobile money providers, will be critical to further broadening the use of mobile banking.

Moreover, further policy actions to remove obstacles to financial inclusion include:

  • Provision of basic infrastructure, mainly telecommunications and electricity, which are key for banks’ operations in districts with no bank coverage but with proven economic potential.
  • Implementation of financial literacy programs aimed at raising rural households’ and MSMEs’ awareness about financial services and products provided by financial institutions and formal business management tools.
  • Acceleration of the decentralization of government’s budget execution to rural areas, thus stimulating liquidity in rural areas, a key incentive for opening branches.
  • Promoting agricultural insurance programs aimed at smoothing the volatility of rural households’ incomes, an important determinant of households’ incentive to save through formal banking.
  • Improving the collateral framework so as to widen the range of assets that can serve as collateral for lending, especially in rural areas where value is often stored in nonstandard assets such as crops and livestock. These policies, however, should be viewed as complementary to each other rather than in isolation.

International donors and institutions have a long history of providing financial support and technical assistance to Mozambique in financial sector development. Going forward, the implementation of the Financial Sector Development Strategy is a significant undertaking that requires the government to galvanize continued external support. In this regard, the World Bank approved the first Programmatic Financial Sector Development Policy Operation to Mozambique for $25 million in September 2013. The operation will support financial stability, financial inclusion, and long-term development of financial markets. The International Monetary Fund is providing technical assistance in financial sector surveillance, payment systems, and money market development. Other donors are also involved. For example, KfW is helping to establish a deposit insurance fund and, together with the World Bank and the UK Department for International Development, is sponsoring the Financial Sector Deepening Trust Fund to support the development of a deeper, broader financial sector, particularly in rural areas. Continued coordination between these donors’ initiatives and the work of the authorities will be critical to ensure success.


Financial inclusion is an important pillar of the Mozambican authorities’ inclusive growth strategy. Despite the expansion of banking institutions and financial services in recent years, most households and MSMEs are financially excluded. To address this challenge, the authorities adopted the Financial Sector Development Strategy to bring about far-reaching changes in access to and efficient use of the country’s financial services.

Effective coordination between the authorities and donors will be needed. It will also be important to complement financial sector policies with structural reforms that address the issues of low productivity and incomes in rural areas, the geographic distribution of households, and the low managerial capabilities of MSMEs. Each of these constraints exerts an adverse impact either on the expansion of banks into rural areas or on the ability of individuals and businesses to use existing financial services.


    Bank of Mozambique, 2013, “Desafios da Inclusão Financeira em Moçambique: Uma Abordagem do Lado da Oferta,” XXXVII Conselho Consultivo.

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    Batista, C., and P.Vicente,2012, “Introducing Mobile Money in Rural Mozambique: Evidence from a Field Experiment.”

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    di Castri, S.,2013, “Mobile Money: Enabling Regulatory Solutions” (London: GSMA).

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    FinMark Trust, 2013, “FinScope MSME Survey Mozambique 2012,” Preliminary Research Report.

    Sarma, M.,2012, “Index of Financial Inclusion—A Measure of Financial Sector Inclusiveness,” Berlin Working Paper on Money, Finance, Trade and Development No. 07/2012.

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    Sarma, M., and J. Pais,2011, “Financial Inclusion and Development,” Journal of International Development, Vol. 23, No. 5, pp.613–28.

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    Triki, T., and O.Gajigo,2012, “Credit Bureaus and Registries and Access to Finance: New Evidence from 42 African Countries,” African Development Bank Working Paper No. 154.

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The FinScope MSME survey is a nationally representative survey developed by FinMark Trust focusing on MSME owners and their financial service needs. A nationally representative sample of MSME owners was used.


Despite computing the financial inclusion index for several countries worldwide, Sarma (2012) does not compute it for Mozambique. Mozambique’s index discussed in this report is computed by the Bank of Mozambique using an approach largely based on Sarma’s approach.

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