Strengthening financial inclusion through digital banking in the wake of COVID 19 pandemic in Zimbabwe

Abstract

Despite notable progress made by Zimbabwe‟s financial sector to increase financial inclusion for the poor and low-income population in the country, many people remain financially excluded. This research investigates the most appropriate ways to accelerate financial inclusion through digital banking services in Zimbabwe in the wake of the COVID-19-induced rectricting measures such as national lockdown, social distancing, movement restrictions and closure of banking halls.The study provides insight into the forms of digital banking products offered by commercial banks in Zimbabwe (mobile banking, Internet banking, electronic money transfer systems (ZIPIT and RTGs), ATM and POS Machines, plastic money (credit cards and debits cards). Besides, the study assesses the extent to which digital banking is increasing access and usage of key financial inclusion services such as payment systems, microfinance, insurance and savings products. The study further highlights the benefits and challenges of accessing and using digital financial services. Moreover, the study investigates the necessary reforms needed to further strengthens financial inclusion for the poor and low-income people through digital banking. A mixed methods research methodology was used, which allowed for the integration of quantitative and qualitative research methods. Data was collected from a sample of 150 questionnaire respondents, and 23 interview participants. Findings revealed that financial innovation through mobile banking is a key mechanism for driving financial inclusion. Although increased adoption of digital banking technology by all commercial banks in Zimbabwe has made payment systems more accessible, accessibility to and usage of other key financial inclusion services like microfinance, insurance and savings remain low among the poor and low- income groups. Digital financial services are associated with convenience and value-added services for banking clients, yet key challenges such as unstable economic environment, inadequate digital infrastructure and technical support, high costs for accessing banking services, digital trust challenges and low financial literacy levels militate against access and usage of digital financial services by the poor and low-income people in Zimbabwe.Based on the results, commercial banks in Zimbabwe should improve their partnerships with Fintech firms, budget for robust financial literacy programs, introduce joint financial education, create gender-sensitive digital banking products to increase women's access to financial services, encourage microfinance uptake through lower interest rates, and use digital banking solutions to simplify the Know-Your-Client (KYC) process. The government of Zimbabwe must craft policies that vi create investor confidence in the country and attract foreign direct investment that can spur long- term economic recovery and growth, develop a national financial literacy policy to promote financial education for the country's poor and low-income population, and strengthen banking supervision to ensure compliance.