Mozambique - Microfinance Penetration and Financial Inclusion

Microfinance Penetration and Financial Inclusion

The state of financial inclusion in Mozambique in 2025 highlights a persistent development challenge: while the nation has achieved significant advancements in digitizing financial access, traditional microfinance institutions (MFIs) remain extremely small and largely concentrated in urban areas. The primary goal of achieving inclusive growth is constrained by the fact that a large portion of the population remains excluded from formal lending, restricting access to crucial credit and investment capital, particularly for smallholder farmers and micro-entrepreneurs.

The Financial Exclusion Gap

Mozambique is classified as a Low-Income Country (LIC) where achieving financial inclusion is a key enabler for reducing poverty and increasing shared prosperity.

Penetration of Traditional Banking

Despite efforts to promote financial inclusion, a significant portion of the adult population remains excluded from traditional banking services. In 2016, less than half the population had access to a bank account (36 percent).

Trends show that as of the end of 2023, the number of bank accounts reached 30.9 percent of the adult population. This suggests that nearly 70% of adults remain unbanked by formal commercial banks.

The number of borrowers from commercial banks stands at approximately 72 per 1,000 adults.

Digital Inclusion as the Main Driver

The main success story in financial inclusion is the massive penetration of digital services, largely mitigating the high cost and geographic constraints of physical banking infrastructure.

By the end of 2023, the number of Mobile Money Operators (MMO) accounts was equivalent to 93.2 percent of the adult population, increasing sharply from 67.9 percent in the first quarter of 2022. Mobile money remains the main driver of financial inclusion.

The government aims to expand access to formal financial services. One headline target of the National Financial Inclusion Strategy (NFIS) was to reach 60 percent of the adult population with physical or electronic access by 2022.

Microfinance Portfolio and Institutional Constraints

The microfinance sector, composed of various entities including microfinance-focused banks, cooperatives, and community-based savings groups (ASCAs and Xitiques), is severely limited in its macroeconomic scale.

• Microloan Contribution to GDP: The microfinance sector remains very small. The sector loan portfolio was estimated at only 1.1 percent of GDP in 2018 (averaging 1.0 percent between 2013 and 2017). This supported data contradicts the substantially higher 15% GDP figure suggested in the query, demonstrating that microfinance lending currently plays a minor role in overall national economic output.

• Outreach: The sector serves only about 0.4 clients per 1,000 adults. Although there are more than 400 microcredit operators, the total number of active clients of microfinance institutions was estimated at only about 100,000 in 2011.

• Sectoral Constraints: While micro, small, and medium enterprises (MSMEs) contribute to 28 percent of GDP and 42 percent of formal employment, most (75 percent) are financially excluded. Lending to agriculture, despite the sector accounting for 23 percent of GDP in 2018, represented only 4 percent of all bank lending. Access to finance remains highly limited for smallholder farmers, with only 0.6% reported to have received credit.

Assessing Grameen-Inspired Models and Return on Investment (ROI)

The growth and effectiveness of microfinance rely heavily on specific methodologies designed to reach the poor, such as the solidarity group or village banking models inspired by Grameen Bank.

Village Banking Models and Performance

The Caixas Comunitárias de Operadores de Microfinanças (CCOM) project, formerly CCCP, is a notable model that utilizes the village banking model through associations of solidarity groups.Model Features: This approach combines conventional microcredit formats (small loans, personal household goods as guarantee) with rural finance techniques (longer duration loans payable after harvest) to reach smallholder farmers who lack access to commercial financial services.Repayment Success: In its initial years, the CCCP-CCOM project demonstrated strong financial performance, consistently maintaining high repayment rates (between 98% and 100% in the first four years of operation) on a portfolio that was growing exponentially.

Sustainability and Impact (ROI Assessment)

The sector's ability to generate sufficient returns to ensure institutional self-sufficiency is varied.

Commercial Viability: While the microfinance sector is diverse, many microfinance institutions are not commercially viable. However, the growth of savings products and adherence to good practice, such as combining savings and loans, is necessary to ensure the long-term financial sustainability of institutions. By the end of 2005, three large MFIs claimed to be financially sustainable (including technical assistance).

Impact on Enterprises: Studies focusing on urban clients show mixed results regarding direct economic impact (ROI for the client):

Retention Challenges: Microfinance providers face high client dropout rates. Designing credit products better tailored to the needs and capacities of target beneficiaries is a necessary measure to retain clients and maintain growth rates. Clients who drop out often leave due to crises (e.g., health problems or death of family members).