Since time immemorial, generations have been saving. And going down the memory lane, lessons can be learnt from the Zunde raMambo concept from the Zimbabwean tradition where the kings store and preserve a strategic reserve of food to help people in times of need. The concept of matura (silos) was also aimed at saving the harvest for future use. Even old scriptures such as the bible talk at length about saving. A passage in Proverbs 21:20, reads: ‘The wise store up choice food and olive oil, but fools gulp theirs down’.
Currently, most Zimbabwean households lack the much needed culture of saving. Resultantly, apart from hindering their own investment prospects, it also prejudices the financial sector of deposits that can be used to provide lines of credit to productive sectors the majority of which are still struggling to be competitive owing to lack of funds to recapitalize.
It should be noted that banks and the whole financial sector do not create wealth. Rather, they facilitate the creation of wealth by lending capital derived from sources such as savings. This thus underscores the need to promote a culture of saving in the country. The question likely to quickly pop up in many readers is: How do we do that in an economy like ours?
What is interesting to note is that there is focus on borrowing to finance economic activities while other nations are saving to lend. The narrative you hear at both household and national level is: Let us clear our debts so that we access more. However, one should pose ask where the money they want to access is coming from. Often times than not, at both household and national level, the challenges associated with paying up debts is evident. The level of non-performing loans tells a story about the current culture on both saving and repaying debts.
Saving is important to the economic progress of a country because of its relation to investment. If there is to be an increase in productive wealth, some individuals must be willing to abstain from consuming their entire income. With multilateral lending institutions unable to avail direct funding at the moment, largely due to the large debt overhang and other factors, the local financial sector is left to lead the way in providing loans and the needed funding to resuscitate the various sectors of the economy in order to create jobs whose trickle-down effect will be and an improvement in the general standards of living for the ordinary person.
Saving , as l alluded to earlier, is a culture and way of life that ought to be inculcated over a long time and is not necessarily hinged upon the income an individual, corporate or government generate though many would want to believe so. The high marginal propensity to consume that currently characterise various economic agents should be addressed as a first step to foster fiscal sustainability. Government has to take a leading role not only by providing an enabling environment but by also reducing the recurrent expenditure as is currently obtaining. Government should therefore provide the necessary leadership to enable the country to move towards promoting a saving culture.
The saving culture should also be taught to children from an early age. This is why it is important to incorporate financial management in the contemporary schools curriculum. This could be done by government in partnership with the financial institutions. Already there are financial inclusion programmes going on, which could be reinforced through parallel program at all stages of the education system. Already, some schools that have already taken up the Piggybank initiative where children are encouraged to save through weekly ‘banking’ of money in their piggy banks. These may seem like little efforts but in future they will have an impact on the economy.
There are some who hold the view that saving is for the rich and well off. This view emanates from a lot of misinformation, something that can easily be corrected by rolling out relevant awareness and education programmes. Every individual and corporate must be made to be cognisant of the importance of saving in the body economic of the country. Citizens must therefore know and understand that banks’ ability to lend is hinged upon the amount of savings trickling into their coffers, on top of borrowings from elsewhere.
Further, the financial education provided should extend beyond savings. There seems to be an information gap which should be covered on products offered and incentives attached by the financial institutions. Citizens need to be empowered with the knowledge, to help them create generational wealth. The onus is also on financial institutions to provide individuals with full information about the products they offer and incentives attached.
For example, when a depositor only has a savings account with the bank, then the rate of interest paid will be low. However if one opens a banking check account, a line of credit, creates a money market or investment portfolio or a combination of any such services, the percentage paid as interest on their savings increases. Financial literacy thus has the potential to create and instill this much needed culture amongst the populace.
One of the reasons proffered by many people as partly explaining dwindling levels of savings in the economy is the lack of confidence in the financial sector of the country. The financial crises, at the turn of the New Millennia, played a critical role in depleting confidence in the financial sector and there is need for the whole financial system to conduct business in a transparent and efficient manner at the same time giving bold and tangible assurance that measures are in place to avoid bank collapse and the subsequent loss of savings by the general populace. However, strides are being made with the setting up of the Depositors Protection Corporation as well as the strengthening financial institutions capitalization requirements.
There are a cocktail of measures that can be taken to cultivate the saving culture in every citizen of the country. Everyone has a role to play and, if played effectively, there is potential to exponentially increase the number of people immersed in the saving culture. The revival of the nation economically is no doubt pinned on the ability of its citizens to save and create more wealth from within instead of waiting for offshore capital and lines of credit which are volatile or may come with stringent conditions.
In light of the above, it is therefore important to save as a means to turning around the country’s fortunes!
Dephine Mazambani writes in her capacity as Chief Economist for the Bankers Association of Zimbabwe. For your valuable feedback and comments related to this article, Dephine can be contacted on dephine@baz.org.zw or on numbers 04-744686 and 0773841566