MOZAMBIQUE: Financial services scheme will help rural areas

[ This report does not necessarily reflect the views of the United Nations]

MAPUTO, 23 Sep 2005 (IRIN) - An ambitious government programme to expand financial services to Mozambique's rural areas has sparked keen interest among local banking institutions, which have tended to limit risk exposure by confining their operations to the capital, Maputo.

The US $34.27 million for the eight-year programme was provided by the International Fund for Agricultural Development, the African Development Bank and the Mozambican government.

When President Armando Guebuza took power in February he pledged to improve the country's economic infrastructure, especially in the countryside where 75 percent of the country's 18 million people live.

"The rural population should be part of our society, and for this to happen we need to provide financial services to them in a way that is sustainable," programme manager Joao Carilho told IRIN.

"But the financial institutions are almost all in Maputo because it was risky for financial agents to take their services to the rural areas. We need to encourage people in the rural areas to save, so they can get interest, instead of keeping their money under the bed," he pointed out.

Carilho noted that even in areas where a considerable amount of money was circulating, such as in the northern part of the country where there are tobacco and tea plantations, hardly any financial institutions were offering credit facilities.

It was not uncommon for people in rural areas to live up to 30 km from the nearest bank. Teachers in parts of the northern province of Niassa, for example, often had to spend up to 10 percent of their monthly salary on transport to the nearest financial service.

Carilho explained that institutions would have to develop viable projects, with evidence of investment in the local area, and priority would be given to those that aimed to benefit the areas hardest hit by HIV/AIDS.

"Our biggest challenge is make sure the programme is credible after one year. Thirty-four million dollars is nothing to expand a rural financial network," he conceded. "That is why we are talking about only targeting 10 to 20 of the country's 128 districts."

"It is expensive to introduce this new technology and to get credit cards for farmers, for example, but the banks are positive about the programme."

[ENDS]