Poverty is extremely deep and widespread in Zambia, despite the country's abundant natural resources. 61% of the population lives below the poverty line. Zambia's poverty rate is twice as high as Tanzania, and three times worse than Uganda, by comparison. Poverty affects over 80% of the people in rural areas, especially in regions that are poorly suited to farming. The poorest households are headed by women — since men commonly migrate in search of employment — or by people suffering from chronic illnesses, such as HIV, tuberculosis and malaria.
Founded in 2001, FINCA Zambia today is a regulated, deposit-taking micro-finance organization, serving nearly 90,000 customers. FINCA started-off mainly in urban areas, but is actively expanding its rural outreach. Mobile and agency banking factor prominently in the organization's strategy as a way to improve the quality and reach of its services.
Reaching the Financially Excluded
Financial exclusion affects 2 out of every 3 adults in Zambia, making it difficult for most people to conduct business, to run a household and to build a future. With poverty so deep and widespread, the income that a family can earn through a small business might be the difference between one or two full meals in a day, while small amounts of savings can keep a child in school. The financial services provided by FINCA Zambia are intended to help families implement these basic survival strategies.
FINCA Zambia's mission of financial inclusion stands out in two respects. First, it is the only subsidiary where savers outnumber borrowers by a 4 to 1 ratio. For many poor families, savings is a more relevant service than credit. The other is that FINCA Zambia has a higher percentage of female borrowers than any other subsidiary in the region. This outreach to women takes on added importance given the fact that so many men are working far from home.
Quality of Life
The living standards of our clients in Zambia are in line with a country with widespread poverty and poor basic services. Half the households have no running water, and a quarter are lacking electricity. The educational status of family breadwinners is exceedingly low: 43% have only a primary education or less. And, as is common throughout the region, a high percentage (40%) do not own the home they occupy.
While these kinds of living standards are common in the region — especially in countries that have significant rural outreach, like Uganda, Tanzania and Malawi — Zambia is unique in that these quality-of-life issues are affecting a clientele that is almost entirely urban. (Though it is shifting towards rural areas.) Cities may offer more economic opportunity — and better access to electricity — but they do not guarantee a better quality of life, especially for those at the bottom of the ladder.
Income & Employment
Income & Employment
FINCA’s clients in Zambia, on average, earn $2,208 each year to support their families. These borrowers employ about 42,489 people country-wide, or 1.6 per enterprise, including themselves. More than half of these employees are earning wages that are above the national poverty line.
As compared to most of the other countries we've studied, our clients in Zambia make comparatively less-intensive use of paid laborers, and they are less inclined to hire more workers in response to the FINCA loan. The main reasons for this muted employment effect will be found in the structure and dynamics of Zambia's small-scale economy, and may also relate to the fact that Zambia has a much higher incidence of poverty than its neighbors. In part, it also reflects the fact that a higher percentage of our Zambian customers are engaged in trading activities (including crops), which function mostly as forms of self-employment than enterprise per se.
FINCA Zambia has the highest outreach to women in the region. As seen by the rate of enterprise ownership, most of FINCA's female borrowers are running their own businesses, and they are usually the main source of income for their families. A quarter of them are single mothers, also the highest in the region. Woman-run enterprises are contributing a smaller share of the total jobs, however, because they are more likely to be engaged in activities such as trade, which are less prone to use hired workers.
In addition to the 14,500 female borrowers, an additional 20,000 women are employed in the businesses of FINCA's borrowers. These women make up about 60% of the 34,000 people working in our clients' enterprises. While the wages may be low, they are a critical lifeline for their families, since many of these women are the heads of poor households.
Attaining Business and Personal Goals
Over half of borrowers (51%) in Zambia are interested in expanding their business; an additional 5% reported that their goal is to start a new business. The next-highest priority of Zambian’s clients is to improve their homes.
The overwhelming majority of our borrowers in Zambia believe that the FINCA loan was (or will be) instrumental in helping them to achieve these goals. While we do not yet measure this indicator among non-borrowers, FINCA also aims for its savings services to help clients meet these aspirations. The regular accumulation of small interest-bearing deposits can eventually provide the resources for our customers to finance a small business or improve their homes.