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FinScope MSME Survey Mozambique 2012
Table of contents
Acknowledgements 1
List of figures 2
List of tables 3
List of case studies 3
Acronyms and abbreviations 4
Definitions 5
Executive summary 7
1 Introduction and background 8
1.1 Background to the FinScope MSME study 8
1.2 Methodology of the study 9
2 Country context: MSMEs and the financial sector in Mozambique 11
2.1 Socio-economic context 11
2.2 MSME support 11
2.3 Financial services sector 12
3 Overview of the size and scope of the MSME sector in Mozambique 13
3.1 MSME owners 14
3.2 Employees 18
3.3 Nature of businesses 19
4 Financial inclusion 23
4.1 Overview 23
4.2 Banking 28
4.3 Borrowing and credits/loans 30
4.4 Savings and investments 33
4.5 Insurance and risk management 34
5 Key challenges 36
5.1 Starting the business 36
5.2 Operation and management 38
5.3 Growing the business 39
6 Conclusions and recommendations 41
6.1 General recommendations 41
6.2 Financial inclusion specific recommendations 44
Appendix A: Survey methodology and approach 46
Appendix B: Analytical framework for financial inclusion 50
1
Acknowledgements
This report was written jointly by ICC Mozambique Lda and FinMark Trust (FMT).
FinScope MSME Mozambique was designed to involve a range of stakeholders engaging in a comprehensive consultation process,
thereby enriching the survey and ensuring appropriateness and buy-in. We would like to thank all individuals who participated in this
project in their personal and institutional capacity, without which the project would not have been successful.
The survey was carried out under the auspices of the Ministry of Finance and funded by the German Development Cooperation
through the KfW Development Bank (KfW).
A Steering Committee chaired by the Ministry of Finance was set up which comprised representatives from the of the Ministry of
Finance (Piedade Macamo, Deputy National Director of Treasury and Emília Coutinho), FinMark Trust (Sabine Strassburg and Jabulani
Khumalo), the FSTAP Coordinator (Gabriel Mambo), Bank of Mozambique (Esselina Mausse and Esmeralda Fumo from the Foreign
and Research Department, respectively), Instituto Nacional de Estatistica – INE (Saide Dade, Director of National Accounts and General
Indicators), Ministry of Planning and Development (Finório Castigo from the Research Department), IPEME (David Matambo from the
Research and Statistics Department), the Confederation of Business Associations of Mozambique – CTA (Otília Pacule), as well as the
FMT Local Project Coordinator (Tânia Saranga) who coordinated the entire project locally which ensured the smooth running of all
survey stages. These stakeholders performed an integral role in the design of the survey questionnaire and provided valuable insight
into the MSME sector in Mozambique.
Further, we would like to thank INE for their vital contributions (especially Saide Dade and Carlos Creva) in providing statistical oversight
of the survey, including sampling and weighting of the data. In addition, INE played an important role in the training of the enumerators
and the quality control process during fieldwork.
Last but not least we would like to acknowledge the research suppliers GfK Intercampus (Luis Couto and team – fieldwork) and ICC
(Henriqueta Hunguana and team – analysis) who implemented the survey, and thank their staff including their supervisors and
coordinators, provincial supervisors, team leaders and enumerators, as well as the office staff who worked tirelessly on this survey.
Republic of Mozambique
2
List of figuresFigure 1: Methodological overview 10
Figure 2: Key statistics (World Bank) 11
Figure 3: MSME sector in Mozambique – overview 13
Figure 4: Distribution of the MSME owner population by province 14
Figure 5: Percentage of MSME owners among the total adult population by province 15
Figure 6: Distribution of MSME owners by location and gender 15
Figure 7: Distribution of MSME owners by levels of education 16
Figure 8: Distribution of MSME owners by source of skills acquirement 16
Figure 9: Distribution of MSME owners by monthly income 17
Figure 10: Paid versus unpaid employees 18
Figure 11: Business sector (self-classified) 19
Figure 12: Specific business activities 19
Figure 13: Age of businesses 20
Figure 14: Main operating locations 20
Figure 15: Proportion of MSME owners with registered/licensed businesses 20
Figure 16: Reasons for not registering 21
Figure 17: Financial inclusion overview 23
Figure 18: Overlaps in product usage 24
Figure 19: Construction of the Access Strand 24
Figure 20: Access Strand by location and region 25
Figure 21: Access Strand by gender 25
Figure 22: Access Strand by province 26
Figure 23: Access Strand by business size and business type 27
Figure 24: Access Strand – country comparison 27
Figure 25: Bank status – account usage for business purpose 28
Figure 26: Key drivers for banking choice 28
Figure 27: Key barriers to having a bank account in the name of the business 29
Figure 28: Distance from business to bank 29
Figure 29: Borrowing overview 30
Figure 30: Credit Strand 30
Figure 31: Borrowing mechanisms (of those who borrow) 31
Figure 32: Reasons for borrowing (key drivers) 31
Figure 33: Reasons for not borrowing (key barriers) 32
Figure 34: Requirements to access business loan from a commercial bank 32
Figure 35: Savings overview 33
Figure 36: Savings Strand 33
Figure 37: Savings mechanisms (of those who save) 33
Figure 38: Reasons for saving (key drivers) 34
Figure 39: Reasons for not saving (key barriers) 34
Figure 40: Main risks 34
Figure 41: Reasons for not having insurance (key barriers) 35
Figure 42: Main constraints to starting the business 36
Figure 43: Finance required for starting the business 36
Figure 44: Main sources of money to start the business 37
Figure 45: Motivation to start the business versus realities 37
Figure 46: Main constraints to managing the business 38
Figure 47: Main constraints to growing the business 39
Figure 48: Perceptions of MSME owners 40
Figure 49: Need for formalisation – costs versus benefits 44
Figure 50: Sampling approach 48
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List of tablesTable 1: Distribution of MSME owners by business type 15
Table 2: Overview of demographics – individual entrepreneurs versus business owners
with employees 17
Table 3: Profile of employees 18
Table 4: Size and scope of the MSME sector – country comparison of key statistics 22
Table 5: Questionnaire structure 47
Table 6: Sample allocation 48
List of case studiesCase study 1: Vicente, successful shoe shiner 13
Case study 2: Isabel, student selling weaves at the market 17
Case study 3: Josefina, experienced entrepreneur in the construction business 22
Case study 4: Tania, young entrepreneur 37
Case study 5: Cacilda, versatile business woman 40
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Acronyms and abbreviationsAIMO Associação Industrial de Moçambique
AMOMIF Associação Moçambicana de Microfinanças
APCM Associação para Promoção do Cooperativismo Moçambicano
BAU Balcão de Atendimento Único
BSM Business Sophistication Measure
CAE Classificação das Actividades Económicas
CEMPRE Censo de Empresas
COrE Centro de Orientação do Empresário
CPI Centro de Promoção de Investimentos
CSCs Credit and Saving Cooperatives
CTA Confederação das Associações Económicas de Moçambique
DFID Department for International Development
EAs Enumeration Areas
FARE Fundo Anual de Reabilitação Económica
FDD Fundo de Desenvolvimento Distrital
FDH Fundo de Desenvolvimento da Habitação
FDI Foreign Direct Investment
FMT FinMark Trust
FSTAP Financial Sector Technical Assistance Project
GDP Gross Domestic Product
GNI Gross National Income
ICC International Capital Corporation
ICT Instituto de Ciencia e Tecnologia
IFAD International Fund for Agricultural Development
INE Instituto Nacional de Estatística
INNOQ Instituto Nacional de Normalização e Qualidade
INPI Instituto Nacional de Propriedade
INSS Instituto Nacional de Segurança Social
IPEME Instituto de Promoção da Pequena e Média Empresa
IRPC Imposto sobre o Rendimento de Pessoas Colectivas
IRPS Imposto Sobre Resndimento de Singulares
ISPC Imposto Simplificado para Pequenos Contribuintes
KfW KfW Development Bank (German Development Bank)
M&E Monitoring and Evaluation
MFIs Microfinance Institutions
MFSDS Mozambique Financial Sector Development Strategy
MIC Ministério da Indústria e Comércio
MSME Micro, Small and Medium Enterprises
PARP Plano Anual para a Redução da Pobreza
PDRHCT Plano Estratégico de Formação e Desenvolvimento de Recursos Humanos para a Área de Ciência e Tecnologia
PPS Probability Proportional to Size
PRONASAR Programa Nacional de Abastecimento de Água e Saneamento Rural
PSAA Pequeno Sistema de Abastecimento de Água
RFSP Rural Finance Support Program
ROSCA Rotating Savings and Credit Associations
SGs Savings Groups
UKaid United Kingdom Department for International Development
UN United Nations
UNAC União Nacional de Camponeses
UNCTAD United Nations Conference on Trade and Development
VAT Value Added Tax
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Definitions
TERM DEFINITION
Access Strand A measurement of financial inclusion across the formal-informal institutional provider continuum
Adults Those people aged 18 years or older
Banked Individuals using one or more traditional financial products supplied by commercial banks
Credit Obtaining funds from a third party with the promise of repayments of principal and, in most cases,with interest and arrangement charges in exchange for the money
Demand-side barriersDemand-side barriers to access financial services relate to characteristics inherent to individualsthat prevent them from using financial services such as perceived insufficient income, low levels offinancial literacy and lack of trust in financial institutions
Enumeration Area (EA)
Enumeration area (EA) is a well identified territorial unit containing the prescribed population size(usually about 80 to 120 households) in which enumeration is to be carried out by a singleenumerator within a specified period of enumeration. Each EA has a unique 10 digit geo-codethat reflects the province, district, ward and land use sector in which it is located
Formal other Financial products/services supplied by formal financial institutions which are not banks
Formal productsProducts provided by government regulated financial institutions such as commercial banks,insurance companies and microfinance institutions
Formally includedMSME owners using formal financial products supplied by institutions governed by a legalprecedent of any type. This is not exclusive usage, as these individuals may also be using informalproducts
Financial access landscapeA measurement of usage of both formal and informal products across the four main productgroups: transactions, savings, credit and insurance
Financially served MSME owners using one or more formal and/or informal financial products/services
Financially excluded MSME owners who are not using any formal or informal financial products/services
Financial inclusionThe extent to which the adult population in the country engages with financial products andservices, such as savings, transaction banking, credit and insurance, whether formal or informal
Informal productsFinancial services provided by individuals and/or associations which are not regulated bygovernment such as savings clubs and private moneylenders
Informally only servedMSME owners who are not using any formal financial products but who are using one or morefinancial products/services supplied from an informal source, such as a savings club or informalmoneylender
Informally servedMSME owners who make use of informal financial products (regardless of whether or not theyuse formal financial services and products)
Note: Some graphs add up to more than 100% due to multiple mentions, i.e. the respondent could give more than one answer. As
such, the graph includes overlaps in responses and cannot be added to 100%.
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TERM DEFINITION
MSME
Micro, small and medium enterprises (MSMEs) are defined by the number of employees(according to the “Estatuto Geral das MPMEs” approved by the Council of Minsters Decree no.44/2011 of September 21st). This includes individual entrepreneurs (without any employees),micro businesses (with 1 to 4 employees), as well as small businesses (5 to 49) and medium-sizebusinesses (50 to 100 employees). For the purposes of this survey, the term MSME includesformal and informal businesses. Informal businesses refers to enterprises that are not registeredand/or licenced with any government institution within Mozambique. MSMEs also includeagricultural activities if 50% or more of the produced goods are sold.
InsurancePayment of a premium for risk of an event happening, where payout is made if or when the eventoccurs
Rural Rural area is the territorial zone not covered by the 23 cities (Resolution No. 7/87) and 68 urbanvillages / towns (Resolution 9/87)http://www.ine.gov.mz/documentacao/classificadores
Savings Safeguarding and accumulating wealth for future use
Supply-side barriersSupply-side barriers to access to financial services relate to factors inherent to financial serviceproviders that prevent individuals from using their services such as location of access points andthe cost of using their services
TransactionalFinancial services that use cash or other means (such as cheques, credit cards, debit cards or otherelectronic means) to send or receive payments
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Executive summaryThis report provides a synthesis of the findings from the FinScope MSME Survey, which was carried out in Mozambique in 2012. Thisstudy was initiated by the Ministry of Finance and FinMark Trust, with funding provided by the German Development Cooperationthrough the KfW Development Bank (KfW). The primary aim of the research was to describe the micro-, small-, and medium- businesssector in Mozambique as well as the key challenges MSME owners face (with particular focus on their financial service’s needs) – andas such close the information gap, which exists especially for unregistered businesses (mainly individual and micro-entrepreneurs).These MSME owners may be identified under the General Statutes of Small and Medium Enterprises and also extend to the informalsector – individuals that are not formally registered. This information helps to identify and design appropriate support programmesfor the whole sector, determining policy direction and relevant financial products and services to address the needs of the MSMEowners in Mozambique.
The survey involved a comprehensive listing exercise and interviewing a nationally representative sample of 3 429 MSME owners (18years and older, including those who employ 100 people or less, as well as individual entrepreneurs without any employees). Turnoveris also included under the General Statutes of Small and Medium Enterprises for their classification, however for the purposes of thisstudy, turnover was not used as a selection criteria due to high subjectivity and reluctance to disclose reliable income figures.
This research report provides an overview of the project, its topline findings and the issues arising from the study. In particular itprovides an insight and contributes to the understanding of critical factors impacting small-scale entrepreneurial activity in Mozambique.
Key take-outsPEOPLE: An estimated 5.4 million people work in the MSME sector in Mozambique, including 4.5 million MSME owners (18 yearsand older) and about 850 000 employees (any age). That means that almost every second adult in Mozambique engages in MSMEactivities1. The employees are mainly male (75%), but unpaid workers are mainly female. The MSME owners are usually young (41%are 30 years or younger), mainly male (60%), with basic levels of education (85% have primary education or less), and are usually headof households (75%). Often, the entrepreneurial activity is the only source of income (84%). The main motivation to start the businessis driven by need, meaning the businesses are survivalist rather than opportunistic. Although business owners have largely positiveattitudes towards the business, many are worried about sustainability. MSME owners usually work long hours but have low levels ofincome.
BUSINESSES: The 4.5 million MSME owners own an estimated 4.9 million businesses (meaning, some business owners havemore than one business). They are mainly individual entrepreneurs (without any employees – 93.3%) and microbusinesses (1 – 4employees – 6.6%). The sector is driven by wholesale and retail (44%), as well as agricultural activities, forestry and fishing (22%). Mostof the businesses are located in the rural areas (87%), and operate mainly from residential premises (46%). They are largely informal(not registered – 89%) and relatively young (mainly start up and growth phase, 66% are in operation for 5 years or less).
FINANCIAL INCLUSION: About 25% of MSME owners are financially included, meaning they use/have financial products/servicesto manage their business finances (formal and/or informal). This means that 75% of MSME owners are financially excluded, i.e. theydo not use any financial products/services (neither formal nor informal) to manage their business finances. Only 11% are served byformal institutions (bank and other formal non-bank). The informal sector pushes out the boundaries of inclusion as 18% MSMEowners use informal mechanisms (e.g. savings groups) to manage their business finances. A total of 46% of MSME owners save(mainly at home), but only 5% borrow money (mainly from family and friends). Main drivers for savings and borrowing relate togrowing/expanding the business. Main barriers, in turn, relate to monetary reasons (low/irregular income). Although MSME ownersface a number of risks, most are not insured (99%). Financial inclusion is higher among small and medium size businesses, women, amongservice providers, as well as in urban areas and main urban centres (Maputo Cidade).
CHALLENGES: Main challenges reported by MSME owners relate to access to finance/sourcing money (i.e. mobilizing funds),infrastructure and sales/marketing. The following challenges affect financial inclusion: accessibility/proximity in rural areas (banks aretoo far away), affordability (income from MSME is too low/irregular, bank charges are too high, insurance is too expensive), andappropriateness (many MSMEs lack required formality and documentation such as business address and financial records to open abank account). Other challenges include limited use of sophisticated marketing strategies, and the fact that many businesses arenecessity driven (rather than opportunistic) which affects growth and sustainability of the businesses.
1 MSME owners aged 18 years and older and employees aged 16+ = Total 5,4 million people (about 49% of Mozambique’s adult population)
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1 Introduction and background1.1 Background to the FinScope MSME study
It is widely acknowledged that micro-, small-, and medium-enterprises (MSMEs) are significant contributors to job creation,development and poverty alleviation. Given the crucial role of MSMEs in the national economy, it is in the common interestto harness and optimise this potential by putting into place strategies to mobilise and enable MSME growth and development.To do so, it is imperative that these interventions are targeted and evidence-based. However, the lack of accurate and reliableinformation about the sector and the challenges it faces, have been identified as the key constraints in achieving this objective.
It is in pursuit of this objective that the Ministry of Finance with support from the KfW and FMT initiated the FinScope MSMESurvey Mozambique 2012.
The FinScope MSME Survey is a nationally representative survey developed by FinMark Trust focusing on MSME owners andtheir financial services’ needs. The aim of this survey is to build a comprehensive body of evidence. The objectives of theMozambique FinScope MSME Survey include the following:
n To assess the size and scope of both formal and informal micro-, small-, and medium-enterprises (MSMEs) in Mozambiquen To describe the levels and landscape of access to financial products and services (both formal and informal)n To identify the most binding constraints to MSMEs development and growth with a focus on access to financial marketsn To identify and describe different market segments with specific development needs in order to stimulate segment-related
innovationn To propose recommendations regarding financial assistance to MSMEs and financial policies
FinScope MSME Mozambique was designed to engage a broad range of stakeholders in a comprehensive and intensiveconsultative process. This process has enriched the survey and the shared results have contributed meaningfully to memberswho have a common interest in MSME development and financial inclusion, as well as to the overall growth and developmentof the country. The study was funded by the German Development Cooperation through the KfW Development Bank (KfW),and implemented by GfK Intercampus (fieldwork) and ICC (analysis) with the support of INE and FinMark Trust. A SteeringCommittee chaired by the Ministry of Finance was set up which comprised representatives from the Ministry of Finance,FinMark Trust, the FSTAP Coordinator, Bank of Mozambique, Instituto Nacional de Estatistica – INE, Ministry of Planning andDevelopment, IPEME, as well as the Confederation of Business Associations of Mozambique. These stakeholders performedan integral role in the design of the survey questionnaire and provide valuable insight into the MSME sector.
This report summarises the findings of the FinScope MSME Survey Mozambique 2012. It has been written with the followingobjectives in mind:
1. To provide background information on FinScope MSME as a tool and to describe how it can be used to build inclusivefinancial markets;
2. To provide insight on the methodology used in the FinScope MSME Survey Mozambique 2012 so that users of the surveycan understand the implementation arrangements and the rigorous approach to sampling that produced the data set;
3. To present high level findings of FinScope MSME Mozambique 2012 to enhance stakeholders’ understanding of the currentstate of financial access, and to use this understanding as a baseline to inform and guide future developments; and
4. To make recommendations to stakeholders (financial sector and policymakers) as to how to improve financial access.
Findings are reported in a manner comparable to FinScope reports in other countries. However, there is a wealth of data containedin this survey that has not been covered in this report. It is therefore recommended that stakeholders review the data available to seehow it can help them to address financial and development questions that are significant to them.
This report is complemented by a brochure and a launch presentation.
9 2 Note: The term ‘employees’ here includes all people working in the business – both paid and unpaid (excluding the business owners).
About KfWThe KfW German Development Bank is Germany's leading development bank and is an integral part of KfW Bankengruppe.Together with other countries, the organisations of the international community and local institutions, KfW helps people indeveloping and emerging nations to make lasting improvements to their basic conditions of life and to protect the climate. Assuch, KfW works worldwide to implement development cooperation programmes and projects for the Federal Ministry forEconomic Cooperation and Development (BMZ), the European Commission, and other Governments in various countries.In large, the requisite funds for the promotion of developing countries are allocated from the German Federal budget. Inaddition, KfW raised additional resources on the capital markets and deploying these for the development and climateprotection finance. Financial know-how is matched by long-standing development-policy expertise providing technical assistanceand know-how from diverse disciplines to drive dialogue with local partners and provide advice to the Federal Government.
About FinMark TrustFinMark Trust, an independent trust based in Johannesburg, South Africa, was established in March 2002 and is funded primarilyby UKaid from the Department for International Development (DFID) through its Southern Africa office. FinMark Trust is anot-for-profit independent trust whose purpose is ‘Making financial markets work for the poor, by promoting financial inclusionand regional financial integration’. In pursuit of its purpose, FinMark Trust supports institutional and organisational developmentwhich increases access to financial services in Africa, by conducting research to identify the systemic constraints that preventfinancial markets from reaching out to poor consumers and MSME owners, and by advocating for change on the basis ofresearch findings.
About the FinScope MSME SurveyThe FinScope MSME Survey is a research tool developed by FinMark Trust focusing on small businesses and their financialservices’ needs. It was first piloted in South Africa in 2006 and since then the survey methodology has been applied in Zambia(2008), South Africa (2010), Tanzania (2010), Malawi (2012), and Zimbabwe (2012).
1.2 Methodology of the studyIn this survey, MSMEs are defined by the number of employees (according to the “Estatuto Geral das MPMEs” approved by
the Council of Ministers Decree no. 44/2011 of September 21st) including individual entrepreneurs (0 employees),
microbusinesses (1 to 4 employees), as well as small- (5 to 49) and medium-size businesses (50 to 100)2. For this study, MSMEs
also include informal businesses which refers to enterprises that are not registered or licenced with any government institution
within Mozambique. A nationally representative sample of MSME owners was drawn, including those who:
n Are 18 years or older ;n Perceive themselves to be business owners/generating an income through business activities; andn Employing 100 people or less as well as entrepreneurs without any employees.n Turnover was not used as a selection criteria due to the high subjectivity and reluctance of respondents to disclose reliable
income figures.
FinScope MSME Survey Mozambique 2012 is representative on national, urban/rural, and provincial levels. The sample frameand weighting of the data was conducted by INE based on the Master Sample 2010 (updated Census 2007 data). A total of523 Enumeration Areas (EAs) were sampled using probability proportional to household size (PPS), including 162 urban and361 rural areas. All households in the selected EAs were then listed. As such over 54 000 households were listed. Within thehouseholds, all MSME owners were identified (18 years and older, employing 100 people or less, as well as individualentrepreneurs). Within each selected EA, six to eight qualifier households (with MSME owners) were systematically selectedfrom the listed MSMEs. Within the selected households, where there was more than one business owner, a Kish Grid was usedto randomly select the qualifying household member with whom to complete the interview (this individual was the ultimatesampling unit). A total of 3 429 interviews with MSME owners were conducted during September to December 2012 by GfKIntercampus. In addition, a number of in-depth interviews were conducted with MSME owners to generate case studies which complementthe survey findings.
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The table below provides a summary of the methodology applied.
Logistics Details
Methodology Face-to-face, pen and paper interviews were conducted among MSME owners inMozambique
Definition of MSME owners
Survey of MSME owners, defined as individuals who are:
n 18 years or older
n Perceived themselves to be business owners/generating an income through businessactivities
n Employing 100 people or less, as well as individual entrepreneurs without any employees
n Turnover was not used as a selection criteria due to the high subjectivity and reluctance ofrespondents to disclose reliable income figures.
Sample sizen=3 429, representative on national, urban/rural, and provincial levelSample drawn by INE based on the Master Sample 2010 (updated Census 2007 data)
Sampling frame Listing exercise, population stratified by location (urban/rural)
Sample area selection523 Enumerator Areas (EAs) were selected using probability proportional to size (PPS),interviews were conducted in 162 urban and 361 rural EAs
Household qualification 6 – 8 households were selected from each EA using systematic random sampling
Respondent selection Final respondent to interview was selected using a Kish Grid
Questionnaire length ± 75 minutes
Fieldwork September to December 2012
Quality control and datamanagement
Field checks and quality control checks conducted by GfK, FMT, and INE, data capturing inSPSS, weighting was done by INE, data validation against Census data 2012
ImplementationThe study was implemented by GfK Intercampus and ICC with support from INE and FinMarkTrust
Funding partnersThe study was funded by the German Development Cooperation through theKfW Development Bank
Figure 1: Methodological overview
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2 Country context: MSMEs and the financial sector inMozambiqueThis section is based on a literature review conducted by the Local Project Coordinator Tania Saranga, and ICC contextualisingthe financial and MSME sector in Mozambique. It contains an overview of a range of financial services and mechanisms availableto MSMEs in Mozambique, including both formal and informal mechanisms. An understanding of the structure of the financialservices system in Mozambique is critical to the understanding of the state of financial inclusion in Mozambique. The tablebelow summarises other key statistics from Mozambique.
3 Source: http://www.worldbank.org/en/country/mozambique 4 Available online at URL: http://www.imf.org/external/pubs/ft/scr/2011/cr11132.pdf
2.1 Socio-economic contextPost-conflict policy interventions, economic reforms, as well as substantial donor support and Foreign Direct Investment (FDI)has led to robust growth in Mozambique. Despite considerable improvements, the Mozambican economy has undergoneminimal structural transformation. The country is still characterised by low levels of education, widespread poverty and highlevels of unemployment, as well as deficient infrastructure and basic services, especially in the rural areas where the majorityof the population resides.
In response to these challenges, the government restructured its development agenda around an Action Plan for ReducingPoverty (PARP 2011 – 2014)4, focused on increased agricultural production, promotion of employment linked to thedevelopment of micro-, small- and medium-size enterprises (MSMEs) and investment in human and social development.
2.2 MSME supportThere are a number of strategies to support the formal MSME sector. However, these efforts by the government have positivespillover effects to informal businesses eg. the increase in the need to register and benefit from these government strategies.In Mozambique, the government’s poverty reduction strategy (PARP 2011:17ff), for example, aims to support MSMEs by:
n Creating an environment favourable to the creation and development of MSMEs and the attraction of domestic and foreigninvestment into labour-intensive industries;
n Ensuring comprehensive access to credit and services for the support and development of MSMEs;n Promoting linkages between small and big firms, with particular emphasis on megaprojects;n Facilitating market access (including infrastructure development);n Encouraging labour-intensive public works that will offer temporary low-cost jobs in areas such as construction and local
infrastructure maintenance; n Implementing the Human Resource Development Plan for Science and Technology (PDRHCT) in the context of
strengthening the technical and scientific capacities of MSMEs and meeting the needs of emerging industries in theproductive sectors; and
n Facilitating access to financial services in rural areas and ensuring better scope for women.
Population Key statistics
Total population 25.2 million (2012)
Total adult population (18+) 10.8 million (2012)
Life expectancy 50 years (2011)
Adult literacy (15+) 56% (2010)
GDP US$ 14.59 billion (2012)
GDP growth 7.4% (2012)
Ease of doing business rank139 out of 185 countries (2012)146 out of 185 countries (2013)
Figure 2: Key statistics (World Bank)3
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The 2007 – 2012 SMEs Strategy defines three strategic efforts to SME development: (i) improvement of the business environment; (ii) development of technological and management capacities; and (iii) development of strategic support to SMEs.
Each of these strategic efforts implies a set of multidimensional actions. Under the ‘improvement of the business environment’effort, a few financial sector policy actions are envisioned, namely:
n Introduction of a credit guarantee system;n The implementation of a leasing system;n Encourage the use of investment funds;n Stimulate banks to increase funding and other services for SMEs;n Encourage banks to strengthen links and networks with rural credit and micro-credit institutions; andn Provision of government credit to refinance rural and micro-credit institutions.
2.3 Financial services sectorThere are 18 commercial banks registered by the Bank of Mozambique (in 2012)5, some of which provide microfinance services.The banking system lacks competition since about 75% of the total financial sector’s assets are concentrated in the threelargest banks, which are closely linked to the Portuguese banking industry.
According to the FinScope Consumer Survey Mozambique 2009, Mozambique has very low levels of financial inclusion,especially uptake of banking products and services, i.e. only 12% of the adult population (16 years and older) use financialproducts/services from a commercial bank. A total of 78% of adults do not use any financial products/services neither formalnor informal (= financially excluded). Financial exclusion is particularly high in rural areas. The strong urban bias of formalfinancial services (including microfinance), in a country where the majority of MSMEs operate in rural areas, is a particular areaof concern. As such, reaching out to the un- and under-served rural population is one of the industry’s major challenges.
The Ministry of Finance of Mozambique, with funds from the World Bank FIRST Initiative, introduced the Mozambique FinancialSector Development Strategy (MFSDS) 2011 – 2020. The pillars of the strategy include maintaining financial sector stability,supporting inclusive economic growth, developing formal financial services and rapidly expanding financial access. One of thestrategy’s focuses is the development and delivery of new financial products for rural areas through use of, for example,community based savings models to lower the costs of providing financial services to rural populations (MoF, 2011)6. In addition,the Rural Finance Strategy was introduced to improve rural finance, e.g. to expand the access to credit for rural individuals,groups and MSMEs, especially women and the poor. The strategy recognises the challenges of bringing financial services to ruralareas (perceived risk, high transaction costs, and the informality and low levels of income), but points to promising methodsfor developing the sector. It calls for continued support for accumulated savings and credit associations (ASCA’s), recognisingthat they often originate as informal groups. Additionally, the plan proposes the development of alternative models that haveworked elsewhere, namely the creation of networks of credit cooperatives by grouping associations along value chains.7
The Central Bank has also introduced initiatives to improve presence in the provinces and as such reduce the cost of cashhandling by institutions facilitating the licensing process of new branches and new institutions. The Local Initiative InvestmentBudget (Orçamento de Investimento de Iniciativa Local – OIIL or 7 bilhoes), for example, has been used to transfer money fromthe central budget to lend to projects in each of Mozambique’s 128 districts. Despite these interventions and considerableimprovements in the network coverage of financial institutions over the years (the number of districts with branches grew from27 in 2005 to 63 in 2012), many areas in Mozambique are still un- and under-served, i.e. there are still 65 districts in the countrythat are unbanked, although some of these have access to microfinance services8. Rural areas9 have only 0.6 branches per100,000 adults, compared to a national average of 4.2. Increasing the geographical spread of the banking sector remains oneof the main priorities. The goal is that 80% of all districts should have branches of financial institutions by 2016.
5 Source: http://www.bancomoc.mz/Instituicoes_en.aspx?id=GINS0001&ling=en6 Ministry of Finance (MoF), Government of the Republic of Mozambique (GRM), 2011. Mozambique Financial Sector Development Strategy (MFSDS)
2011 – 2020.7 Source: FinMark Trust 2012. The Status of Agricultural and Rural Financial Services in Mozambique. Available online at [URL]:
http://www.finmark.org.za/wp-content/uploads/pubs/Rep_statusofAgRuFin_MOZ1.pdf 8 Banco de Moçambique, Desafios da Inclusão Financeira em Moçambique – Uma abordagem do lado da oferta, February 20139 Rural areas are the territorial zones not covered by the 23 cities (Resolution No. 7/87) and 68 urban villages / towns (Resolution 9/87)
http://www.ine.gov.mz/documentacao/classificadores
Employing850 000 people (excluding MSME owners)
13
3 Overview of the size and scope of the MSME sector inMozambiqueThe size of the MSME sector in Mozambique is portrayed by a number of indicators, such as the number of MSME owners,the number of businesses they own, and the number of people they employ in their main businesses, who may or may not beregistered as a formal business in Mozambique. The following figure gives a broad overview of the sector.
There are 4.5 million MSME owners in Mozambique (18 years and older), owning 4.9 million businesses, employing a total of850 000 people (all ages, excluding the business owners themselves). As such, the sector contributes significantly to employmentwith a total of 5.4 million people working in the sector, i.e. almost every second adult in Mozambique engages in MSMEactivities10. Furthermore, it contributes to poverty alleviation as survivalist businesses play a vital role, especially as a buffer againstslipping into deeper poverty and as such reducing individual and household vulnerability.
10 MSME owners aged 18 years and older and employees aged 16+ = Total 5,4 million people (about 49% of Mozambique’s adult population)
4,5 million MSME owners
Owning4,9 million
MSMEs
Figure 3: MSME sector in Mozambique – overview
Case study 1: Vicente, successful shoe shiner
Vicente, successful shoe shiner
Vicente is 43 years old. He lives with his wife, two daughters, and his sister.Supporting a household of 5, he is the only breadwinner in the family, contributingabout MT 8 000 a month (about US$ 270). When his brother left to work in SouthAfrica, he took over his brother’s business as a shoe shiner. In addition, he workspart-time as a private real-estate agent. The business activities have helped him tomake a living for himself and his family for the last 27 years.
“I got to buy a plot of land, build my 3-bedroom house, bought the houses furniture, [and]got officially married […] all thanks to this business.”
Business Sophistication MeasureThe Business Sophistication Measure (BSM) is a segmentation tool developed by FinMark Trust to identify and describe differentmarket segments and to assess the degree of sophistication of MSMEs in Mozambique. As such, 7 groups of businesses wereidentified from a wide range of aspects measured in this survey using core questions relating to what the business had and did,rather than questions that related to a business owner’s perceptions, attitudes, opinions and/or concerns about the business.Indicators used in the segmentation include, e.g. type of the business (number of employees), nature of the business activities,registration, licensing and compliance, ownership structure and assets, financial records, type of financial services used, etc. Usingthese variables, a principle component analysis was used to create an index. The scores on the first principle component
14
obtained from these variables formed the BSM score. The higher the score, the more sophisticated is the business (accordingto the selected variables). The table below gives an overview of the BSM segments for the MSME data. Most of the businessesare in BSM 1 – 4 with about 2 in 5 of the businesses in BSM 1. Given the small sub-sample sizes for some of the BSM segments,however, further analysis of the BSMs would not be representative.
The general trend indicates that the incidence of the following variables increase slightly with higher BSM: incidence ofregistration/licence, compliance with IRPS and VAT, incidence of service providers, number of employees (businesses in lowerBSM segments tend to be individual entrepreneurs), business owners with higher levels of education, cell phones and otherbusiness assets (e.g. website, internet access, company car), and uptake of financial products/services (including credit, savings,and transactional products/services). The South (mainly in Maputo City and Province) showed a higher number of sophisticatedbusinesses compared to the Centre and North; possibly as result of proximity to South Africa and more exposure to bigenterprises. There seems to be little correlation between BSM and years of operation, as well as BSM and operating locationwith the majority of businesses operating from residential premises (except BSM 7).
3.1 MSME ownersAs illustrated below, Nampula has the highest number of MSME owners in Mozambique accounting for 22% of the totalbusiness owner population. However, comparing the number of business owners with the total adult population (18 years andolder) per province11 shows that Cabo Delgado has the highest proportion of MSME owners. Here, about 49% of adults areMSME owners which exceed the national average of 42%. Whereas Niassa province has the lowest proportion of MSMEowners (only every third adult in Niassa owns an MSME).
BSM 1 BSM 2 BSM 3 BSM 4 BSM 5 BSM 6 BSM 7
Number ofBusiness
About 1,97 million
About 750 000
About 490 000
About 480 000
About412 000
About 390 000
About 52 000
Number ofBusiness
43% 17% 11% 11% 9% 8% 1%
11 Using population figures per province from the FinScope Consumer Survey Mozambique 2009
Figure 4: Distribution of the MSME owner population by province
15
The vast majority of MSME owners (93%) are individual entrepreneurs, meaning they do not have any employees in theirbusiness (about 4.2 million) while about 7% of MSME owners employ people in their business (about 300 000). Using theMSME definition by number of employees as explained above, 6.6% of MSME owners run microbusinesses (employing 1 to 4people), while 0.7% can be classified as small businesses (employing 5 to 49 people), and only 0.02% are medium-size businesses(employing up to 100 people).12
The majority of MSME owners are male (60% are female, compared to 40% who are female) and reside mainly in rural areas13
(87% of MSME owners reside in rural areas, compared to 13% in urban areas) – which broadly reflects the distribution of thetotal adult population in Mozambique.
Table 1: Distribution of MSME owners by business type
Number of employeesPercentage of MSME owners
Estimated number ofbusinesses owners
Individual entrepreneurs 0 92.7% 4.2 million
Micro 1 – 4 6.6% 300 000
Small 5 – 49 0.7% 31 000
Medium 50 – 100 0.02% 750
12 Note: The sub-sample sizes for small and medium size businesses are very small. Further analysis would be unstable and hence is not recommended.13 Rural areas are the territorial zones not covered by the 23 cities (Resolution No. 7/87) and 68 urban villages / towns (Resolution 9/87)
http://www.ine.gov.mz/documentacao/classificadores
Figure 5: Percentage of MSME owners among the total adult population by province
Maputo Cidade
Maputo Province
Gaza
Inhambane
Sofala
Manica
Tete
Zambezia
Nampula
Cabo Delgado
Niassa
40
%
40
41
45
37
42
47
43
44
49
33
Urban/rural
13%
87%n 87% Ruraln 13% Urban
Figure 6: Distribution of MSME owners by location and gender
n 60% Malen 40% Female
Gender
60%
40%
16
Consistent with the low literacy levels in the country, the majority of MSME owners have low levels of education: 84% of MSME owners
have primary education or less (including 14% without any formal education). The majority acquired their business skills mainly informally,
taught themselves, through internal networks (family, friends, and/or other business owners) or whilst managing the business, which
indicates that a great need for business training exists.
The survey shows that 41% of MSME owners are 30 years or younger, which might indicate that they are less experienced and not
economically settled yet. At the same time, these business owners are often heads of households (75%). Thus, many started their
business to provide for their families, wanting to generate more income, escape unemployment and poverty. This needs-driven
motivation (63%), however, does not fulfil its promise as many MSME owners in fact have low levels of monthly income (56% have a
personal monthly income of less than MT 2 500 a month (equivalent to about US$ 80), 5% do not have a monthly income) even though
many work full-time, i.e. more than 8 hours a day (49%), six to seven days a week (72%). Nevertheless, survivalist businesses play a
vital role acting as a buffer against slipping into deeper poverty and as such reducing individual and household vulnerability. For 84%,
these businesses are their only source of income.
Figure 7: Distribution of MSME owners by levels of education
Superior
Formação de professores
Técnico médio
Técnico básico
Técnico elementar
Secundário esg2 (11a/12a classe)
Secundário esg1 (8a/10a classe)
Primário ep2 (6a/7a classe)
Primário ep1 (1a/5a classe)
Alfabetização
None
14.6
%
35.7
14.4
0.3
3.3
10.2
19.0
0.3
0.1
0.2
0.1
Figure 8: Distribution of MSME owners by source of skills acquirement
Taught myself
Family (other than spouse)
Whilst managing the business itself/on the job
Previous job or work experience
Mentor/advisor
Spouse
School
Training programmes/courses
University/college
55.2
%
13.7
11.6
0.6
6.9
0.1
2.2
5.5
1.0
Looking at individual entrepreneurs and MSME owners with employees separately reveals small differences in demographics as
summarised in the table below.
17
Case study 2: Isabel, student selling weaves at the market
Isabel, student selling weaves in the market
Isabel is 26 years old. She sells weaves at a stall in the market, working from 8am to 5pmevery day, and going to lectures in the evening during weekdays (studying Economics atthe university). She lives with her mother, 5 brothers, and her daughter (4 years old). Havinggrown up in a business environment, she learned a lot from her mother who has a stall inthe same market. The business is the main source of income (in addition to some rentalincome) – which pays for stall rent and taxes, contributing to household consumption, food,clothing, water and electricity, university fees, and her daughter’s kindergarten.
Figure 9: Distribution of MSME owners by monthly income14
No personal monthly income
1 – 2 500 MT
2 501 – 5 000 MT
5 001 – 10 000 MT
10 001 – 25 000 MT
Over 25 000 MT
Refused/don’t know
%
18
56
5
12
6
2
1
14 This includes all sources of personal monthly income and is not limited to the income generated by the business. Those who do not have a monthlyincome might engage in seasonal business activities (e.g. agriculture).
Business owners: 4.5 million
4.2 million (93%)Individual entrepreneurs
Over 300 000 (7%)Business owners with employees
Gender 59% are male 69% are male
Age 41% are 30 years or younger 38% are 30 years or younger
Education85% have primary education or less (including15% without any formal education)
69% have primary education or less (including13% without any formal education)
Position in the household 75% are heads of households 75% are heads of households
Sources of income85% reported that the business is their onlysource of income
70% reported that the business is their onlysource of income
93%
7%
Table 2: Overview of demographics – individual entrepreneurs versus business owners with employees
18
Employees are relatively young (84% are 30 years or younger, including 12% who are younger than 16 years) with low levels
of education (74% have primary education or less, including 21% without any formal education). The figure below summarises
the information on employees.
3.2 EmployeesThe majority of MSME owners do not have any employees (92.7%). The remaining 7.3% of MSME owners (about 300 000)employ a total of 850 000 people. About 6.6% of MSME owners employ 1 to 4 employees (= microbusinesses). The remaining0.7% employ 5 people or more (= small- and medium-size businesses)15. It is interesting to note that 30% of employees arefamily members – many of which are unpaid (79%). The majority of employees are male (75%) but the majority of unpaidworkers are female (69%). In total, 10% of employees are unpaid. Although the majority of employees are full-time paid(60%), only a quarter of all employees (25%) have written contracts. The following figure summarises some of the key statisticsregarding paid versus unpaid employees.
Figure 10: Paid versus unpaid employees
Paid in kind and money
Paid in kind/services
Temporary/seasonal/contract paid
Part-time paid
Full-time paid
Unpaid
%
8
6
4
10
12
60
850 000 Employees
Gender75% are male But 70% of unpaid workers are female
Age 84% are 30 years or younger (including 12% who are younger than 16 years)
Education 74% have primary education or less (including 21% without any formal education)
Family 30% are family members
Contracts 25% have written contracts
Table 3: Profile of employees
15 Note: This includes all people working in the business (paid and un-paid workers).
19
Specific business activities: The majority of MSME owners in Mozambique are retailers (94%) – many sell products in the
same form either that they are bought or that they have collected from nature, without adding value. Only 6% classify
themselves as service providers, providing mainly skilled services, e.g. mechanic or plumber, followed by professional services,
e.g. medical, legal and accounting services.
16 Note: Business sector classification is self-reported. Agricultural activity was taken into consideration here if 50% or more of the produced goods aresold.
17 Classification according to their main economic activitySource: CLASSIFICAÇÃO DAS ACTIVIDADES ECONÓMICAS DE MOÇAMBIQUE (CAE-REV.2) 2008
3.3 Nature of businessesBusiness sector: The MSME sector in Mozambique is largely driven by wholesale and retail as well as agriculture. About 22%of MSME owners work in agriculture16, while 44% of MSME owners reported to work in wholesale and retail. Another 12%of MSME owners work in manufacturing.
Figure 11: Business sector (self-classified)17
12%
22%
44%
7%n 44% Wholesale and retail trade
(including repair of vehicles and motorcycles)n 22% Agriculture, forestry and fishingn 12% Manufacturingn 12% Other service activitiesn 7% Other sectorsn 3% Mining and quarrying
12%
3%
Figure 12: Specific business activities
Sell something in the same form that I buy
Sell something that I buy but add value to
Sell something that I collect from nature
Grow something and sell
Sell something that I make
Sell by-products of animals
Rear livestock/poultry and sell
Sell somthing that I get for free
Render a skilled service
Render a professional service
Render other services
Render building/construction services
Render tourism-related services
%
46
7
6
2
1
1
3
1
1
0
12
19
1
Retailers94%
Service providers6%
20
Business location: Many MSME owners operate their business from residential premises (46%), indicating that there might bea lack of available and/or affordable operational space. It might also be out of choice considering the nature of the business(e.g. small, informal). A further 28% operate from a stall/table/container which relates to the high percentage of MSME ownersthat engage in wholesale and retail activities. While 16% operate as street vendors, only 3% work in a shopping mall.
Age of the business: MSMEs in Mozambique are relatively young. As shown in the figure below, the majority of MSME owners(66%) reported that their business is 5 years or younger, including 40% that are in the start-up phase (0 to 2 years in operation),as well as 26% that are in the growth phase (3 to 5 years in operation). About 15% of MSMEs are in operation for 6 to 10years and a further 19% are in operation for more than 10 years at the time of the survey.
Start-up0 to 2 years
Growth phase3 to 5 years
Established6 to 10 years
MatureMore than 10 years
40
26
1519
Figure 13: Age of businesses
Figure 14: Main operating locations
Residential premises
Stall/table/container
Street
Shopping Mall
Door to door
Mobile
Other
Farm/small holding
46
%
28
16
2
3
1
2
2
Registration/licensing: Registered companies have their name and statutes published in the Official Government Gazette andare allocated a fiscal number, whereas an operating license can be obtained at the district or municipal level. In total, only 6%of MSME owners reported that their business is registered i.e. they have “Alvara” and “Articles of Association” (mainly as soleproprietors – 78%), and 14% reported that their business is licensed (mainly with district administration 48% and localmunicipalities 22%).
Registered Not registered Do not know Licensed Not licensed
6
89
5 14
86
Figure 15: Proportion of MSME owners with registered/licensed businesses
21 18 Source: http://www.doingbusiness.org/data/exploreeconomies/mozambique#starting-a-business
According to the ‘Doing Business in Mozambique’ study conducted by the World Bank, the registration process has beenrevised and appears to be less time consuming with an average duration of 13 days. However, taking into account that about56% of MSME owners have a personal monthly income of less than MT 2 500, the registration process is still relatively expensivewith a minimum cost of MT 3 000 (= about US$ 100)18 (excluding travel expenses and other additional cost the MSME ownermight incur). This reflects the challenges raised by MSME owners who have not registered/licensed their business. The mainbarriers to registration/licence as reported by MSME themselves relate to monetary reasons (‘Business is too small’ as reportedby 30% and ‘No money to register’ 16%) and a lack of knowledge/complexity of the registration process (22% do not knowhow to register and 6% reported that it is too complicated) as shown in the figure below. As such, the majority of MSME ownersdo not comply with many regulations. For example, a very small percentage of MSME owners (4%) pay corporate, personalor employee compensation tax. Municipal tax, a requirement for an operating license, is paid by 17% of MSMEs. Only 1% ofbusinesses pay social security tax (INSS) – which indicates a huge opportunity for the Government of Mozambique.
Figure 16: Reasons for not registering
Business is too small
Don’t know how
Don’t have money to register
It is too complicated
No benefit
Don’t have time
Tried but was not successful
Registration is being processed
Don’t want to pay tax
Other
Don’t know
Refuse to answer
30
%
22
16
4
4
2
19
3
3
6
1
1
On the other hand, the perceived benefits do not seem to outweigh these challenges. Access to finance, new clients, and rawmaterials can be used as proxy for ‘real’/tangible benefits, whereas compliance with the law (as reported by 36% of MSMEowners), avoiding harassment from authorities (10%), and avoiding fines (7%) might not seem as attractive, yet was reportedby more than a quarter of MSME owners.
22
Case study 3: Josefina, experienced entrepreneur in the construction business
Josefina, experienced entrepreneur in the construction business
Josefina is 52 years old. She runs three businesses, including a construction business, a metalworkshop which produces pots, as well as a rental business. From the income of thesebusinesses, Josefina supports her 2 children and 3 grandchildren. Josefina holds a license forher construction business as this allows her to access public tenders. As such, she is alsoable to access Government support. During the floods in Xai-Xai in 2000, for example, shehelped displaced people to build new homes and received a donation of 1 800 sacks ofcement which significantly boosted her business activity.
Country comparison: Comparing Mozambique with other countries in the region shows that Mozambique has a much higherproportion of individual entrepreneurs (93%) compared to other countries in the region. On average 42% of adults (18 yearsand older) are MSME owners in Mozambique which is similar to Zimbabwe (46%), compared to 17% in South Africa (16 yearsand older), and 13% in Malawi. Levels of registration/licence in Mozambique can also be compared with those of Zimbabwe.
South Africa (2010) Malawi (2012) Zimbabwe (2012)Mozambique
(2012)
Business owners16 years and older
200 employees or less
18 years and older 100 employees
or less
18 years and older 75 employees
or less
18 years and older100 employees
or less
Estimated adult population 33,5 million 6,1 million 5,9 million 10,8 million
Estimated % of adult populationthat owns MSMEs
17% 13% 46% 42%
Number of MSME owners 5,6 million 760 000 2,8 million 4,5 million
Number of MSMEs they own 6 million 1 million 3,5 million 4,9 million
% of MSME owners withregistered/licensed businesses
17% (only CIPC)
3% 15% 6% registered 14% licensed
Number of employees 6 million 1 million 2,9 million 850 000
% of individual entrepreneurs% of businesses with employees
67%33%
59%41%
71%29%
93%7%
Table 4: Size and scope of the MSME sector – country comparison of key statistics
23
19 The analytical framework used here is explained in Appendix A.20 Note: Overlaps in product usage are taken out here, i.e. some people might use both formal and informal products/services and mechanisms to manage
their financial lives.
4 Financial inclusion19
4.1 OverviewIn total, 75% of MSME owners (about 3.4 million which are formally registered and/or informal businesses) are financiallyexcluded, i.e. they do not use any financial products or services (neither formal nor informal) to manage their business finances.If they borrow, they borrow from friends and family; if they save, they save at home. On the other hand, 25% of MSME ownersare financially included (about 1.1 million), i.e. they use financial products or services (either formal and/or informal) to managetheir business finances. While 18% of MSME owners (= 800 000) have/use informal mechanisms to manage their businessfinances, only 11% are formally served (= 500 000), including both banked and other formal non-bank products/services (9%of business owners are banked = 430 000 and 2% of business owners have/use other formal non-bank products/services =70 000). The overlaps in product usage need to be considered here. Thus, the figure below adds up to more than 100%. Theoverlaps are depicted using circles, whereas the dark blue depicts the banked, yellow describes the usage of other formal non-bank products/services, and green the uptake of informal products/services such as savings groups. Product uptake for thosewho use bank products/services is driven by bank savings and transaction products. While other formal non-bankproducts/services are driven by credit and savings products, informal mechanisms are also largely driven by savings (e.g. savingsgroups), particularly among female MSME owners.
Figure 17: Financial inclusion overview
Banked9% (430 000)
Driven by transactions andsavings
Served by other formal financial institutions 2% (70 000)
Driven by credit and savings
Financially excluded 75% (3,4 million)
Informally served 18% (800 000)
Driven by informal savings
Formally served 11% (500 000)
Total business owner (BO) population100% (4,5 million)
Financially included25% (1,1 million)
Formally served
Banked
Other formal
Informal
Excluded
11
%
9
2
18
75
Product uptake is driven by
n Bank savings and transaction productsn Credit and savings productsn Informal savings products
24
BankedOther formal
Informal
Excluded
5.5 0.6 1.0
0.5
0.2
3.2
14.1
74.9
Figure 18: Overlaps in product usage
Figure 19: Access Strand – MSME and Consumer Survey comparison
9 75
78
2 14
12 1 9
n Banked n Formal other n Informal only n Excluded
In calculating the Access Strand, the overlaps are removed and a hierarchical approach is used in order to depict:
n The percentage of business owners who are banked (banked) – identifying business owners using commercial bankproducts. This is not necessarily exclusive usage – these individuals could also be using financial products from other formalfinancial institutions or informal products as well as bank products = 9%
n The percentage of business owners who are formally served but who are not banked (other formal) – identifying businessowners using financial products from formal financial institutions which are not commercial banks such as microfinanceinstitutions or insurance companies. This excludes bank usage, but is not exclusive in terms of informal usage – thesebusiness owners could also be using informal products = 2%
n The percentage of business owners who are not formally served but who are informally served (informal only) – businessowners using informal financial products or mechanisms only. This is exclusive informal usage and does not include businessowners who are within the banked or other formal categories of the access strand that also use informal services = 14%
n The percentage of business owners who are excluded/un-served – business owners using no financial products to managetheir financial lives – neither formal nor informal and depend only on family/friends for borrowing and save at home if theysave for business purposes = 75%
FinScope MSMEMozambique 2012
FinScope ConsumerMozambique 2009
As shown above, informal financial mechanisms play a vital role for MSME owners in Mozambique, pushing out the boundariesof financial inclusion.
Comparing the Access Strand across location, provinces, business size, and gender reveals that levels of financial inclusion arehigher:
n In urban areas (61%) compared to rural areas (20%):n In the South such as Maputo Cidade (80%) compared to provinces in the Nampula (12%):n Among medium-size businesses (100%) compared to small- (75%) and micro-businesses (44%), as well as individual
entrepreneurs (23%);n Among service providers (41%) compared to retailers (25%); andn Among women (35%) compared to men (19%).
25
Rural
Urban 24 39361
7 802 11
South
Centre
North
8 8381
7 8571
18 442 36
Included
20%
56%
17%
15%
61%
Includedn 76 – 100%n 51 – 75%n 26 – 50%n 0 – 25%
Figure 20: Access Strand by location and region
Rural/urban
Region
n Banked n Formal other n Informal only n Excluded
n Banked n Formal other n Informal only n Excluded
Male
Female 11 65222
8 812 9
Included
19%
35%
Includedn 76 – 100%n 51 – 75%n 26 – 50%n 0 – 25%
Figure 21: Access Strand by gender
Gender
26
Included
80%
35%
62%
25%
45%
41%
17%
19%
16%
12%
10%
Includedn 76 – 100%n 51 – 75%n 26 – 50%n 0 – 25%
Maputo Cidade
Manica
Maputo Province
Niassa
Gaza
Inhambane
Tete
Sofala
Cabo Delgado
Nampula
Zambezia
34 20442
18 65134
17 38441
14 7574
12 55294
11 59291
9 8371
8 81101
6 8410
5 8861
3 9061
Figure 22: Access Strand by province
n Banked n Formal other n Informal only n Excluded
27
n Banked n Formal other n Informal only n Excluded
Included
100%
44%
23%
41%
25%
75%
Includedn 76 – 100%n 51 – 75%n 26 – 50%n 0 – 25%
Figure 23: Access Strand by business size and business type
Business size
54 25192
27 56106
8 77141
100Medium (50 – 100 employees)
Small (5 – 49 employees)
Micro (1 – 4 employees)
Individualentrepreneurs
Business type
Service providers
Retailers 9 75142
26 5915
Country comparison: There are much lower levels of financial inclusion in Mozambique compared to other countries in theregion. Only 25% of MSME owners in Mozambique are financially included, compared to 41% in Malawi, as well as 57% and58% in Zimbabwe and South Africa respectively.
n Banked n Formal other n Informal only n Excluded
Included
57%
25%
58%
41%
Includedn 76 – 100%n 51 – 75%n 26 – 50%n 0 – 25%
14 43394
9 75142
22 59109
47 4274
Mozambique (2012)
Zimbabwe (2012)
Malawi (2012)
South Africa (2010)
Figure 24: Access Strand – country comparison
28
4.2 Banking The majority of MSME owners do not use any products or services from a commercial bank (90.5%). Only 9.5% of MSMEowners use products/services offered by a commercial bank and only 0.3% use an account in the name of the business.
Do not use a bank account at all
Use a personal account but notmainly for business banking
Use personal bank account mainly for business banking
Use a bank account which is in the name of the business mainly for business banking
Use someone else’s bankaccount mainly for business banking
%
4.6
4.4
0.3
0.2
90.5
4,9%
use a bank accountmainly for business
purposes
Figure 25: Bank status – account usage for business purpose
Banking is largely driven by savings and cash related transactions (withdrawals and deposits). Cash withdrawals and depositsaccount for 44% of all transactions. Mozambique is a largely cash based economy: 94% of MSME customers make theirpayments in cash and 93% of business owners pay their employees in cash.
Drivers: The main reasons given for opening a bank account in the name of the business at a particular bank relate to thereferrals/recommendations (from friends and family) and advertising (19%). Availability (only bank available at the place –19%) and convenience (16%) were also reported as important reasons for choosing a particular bank. Only 4% chose to opena bank account in the name of the business at a particular bank because of its product offering.
Figure 26: Key drivers for banking choice
Recommended by friend/family
Only bank available at the place
Advertising
Convenience
Previously used/have personal bank accounts there
Bank charges
Friend/family works there
Products/services
Recommended by another small business
Interest rates/the best rates on savings
Interest rates/best rates on credit/loans/borrowing
Other
Don’t know
27
%
19
19
4
10
4
4
3
4
16
4
2
7
29
Barriers: On the other hand, the main barriers to having a bank account in the name of the business relate to monetary reasons,i.e. because the income is too low/irregular as shown in the figure below – which is not surprising given the low levels ofmonthly income. 19% of MSME owners reported that they are not banked because banks are too far away (accessibility –proximity) while 4% reported that they do not know anything about it which indicates a lack of financial literacy / knowledgeabout banks and their products. In addition, MSME owners require numerous documents to open their account, such asidentification document, proof of business address, business registration/licence, other business documents (e.g. Articles ofAssociation etc.), as well as a certain income to cover bank charges, minimum balance required, etc.
Figure 27: Key barriers to having a bank account in the name of the business
Business/income too small
Banks are too far
Irregular income
Can’t afford the minimum balance
Not enough money from business
Don’t qualify
Don’t need one
Planning to in future
Don’t know anything about it
Bank charges
Don’t have business address
Too complicated
I use my personal bank account
Have not registered my business
Don’t know
Refused to answer
Other
27
%
19
12
5
6
6
5
3
2
1
1
10
4
13
2
2
Looking at the accessibility to amenities reveals, that 63% of MSME owners in rural areas have to travel more than 1 hour toget to the nearest bank. There is a great opportunity for alternative distribution channels (e.g. mobile banking).
10 minutes orless
2910
Between 11 and20 minutes
31
8Between 21 and
30 minutes
262
Between 31minutes and 1
hour
7 15
More than an hour
3
63
Don’t know
3 1
n Urbann Rural
Figure 28: Distance from business to bank
4
30
4.3 Borrowing and credits/loans In total, only 5% of MSME owners borrowed money/have taken goods on credit in the past 12 months for business purposes(that excludes money used to start or take over the business), or are currently repaying or owing money/goods for theirbusiness. Only 1% of MSME owners borrow from a bank and 1% borrow from other formal non-bank institutions. On theother hand, 1% borrow from informal groups, and 2% borrow from family and friends as illustrated in the figure below.
Figure 29: Borrowing overview
Banked
Formal other
Informal
Family/friends
Excluded
1
%
1
1
2
95
In constructing the Credit Strand the overlaps in financial product/service usage are removed, resulting in the following segments:
n MSME owners who do not borrow (95%);n MSME owners who only borrow from friends and family (2%) and do not use any formal or informal mechanisms to
obtain credit;n MSME owners who borrow from informal sources such as money lenders but do not borrow from formal sources (bank
or other formal non-bank institutions) (1%) – however, they might also borrow from friends and family; andn MSME owners who borrow from formal institutions (total 2%: 1% from other formal non-bank and 1% obtain credit from
commercial banks) – they might also borrow from friends and family.
Comparing the overview of borrowing and the Credit Strand reveals that there are no overlaps in product update.
n Bankedn Formal other
n Informal n Friends and family only
n Excluded
Figure 30: Credit Strand
1 9511 2
31
Borrowing mechanisms: Of those who borrow (5%), about 32% borrow from friends, family or colleagues. Almost a quarterof MSME owners who borrow obtained loan(s) from Fundo de Desenvolvimento Distrital (24%) and 19% borrow frominformal money-lenders. Only 18% borrow from a commercial bank or micro-bank, and 3% borrow from the GovernmentAgency.
Drivers: MSME owners mainly borrow to grow their business (60%) and for day-to-day business needs (14%), while 10%borrow to finance stock, 10% to buy new machinery or new equipment, and 3% borrow to pay for loss caused by a naturaldisaster.
Barriers: A majority of MSME owners do not borrow (95%), mainly because they fear that they won’t be able to pay it back.24% are scared to borrow, while 18% are afraid to borrow as business is slow. And 9% reported that they do not think thatthey have the necessary collateral/security. 20% reported that they do not have the need to borrow. Many of those whoreported that they do not have the need to borrow cover expenses with savings rather than borrowing.
Friends/family or colleagues
Fundo de Desenvolvimento Distrital
Informal money-lender
Commercial banks and Micro banks
Government Agency
NGO
Cooperative de Crédito
Obtain goods on credit
Empresa de Forento
Employer
32
%
24
19
18
2
1
1
0.5
1
3
Figure 31: Borrowing mechanisms (of those who borrow)
Figure 32: Reasons for borrowing (key drivers)
Growing my business
Day-to-day business needs
To finance stock
To buy machinery
Personal reasons
To upgrade business facilities
New equipment
To buy property
Loss caused by natural disasters/damages
To pay debts
Other
Refused
60
%
14
10
5
5
5
12
2
3
10
3
3
32
In addition to the reasons reported by MSME owners as to why they do not borrow, other barriers might relate to therequirements as set out by formal financial institutions. In order to obtain a business loan from a commercial bank, for example,the MSME owner often requires21 formal registration, a bank account, a business plan, financial records, collateral, and being inoperation for more than one year. However, as illustrated below, many MSME owners do not meet these requirements andhence do not qualify for a loan by design.
Figure 33: Reasons for not borrowing (key barriers)
Figure 34: Requirements22 to access business loan from a commercial bank
I am scared
Don’t need to
Business is slow so I am afraid to borrow
I don’t have collateral/security
I don’t qualify
I’ve tried but was turned down
Borrowed in the past and paid back
I don’t believe in borrowing money
I have collateral/security, but I am not prepared to risk it
My earnings change from month to month
Other
Don’t know
24
%
20
18
9
8
3
7
2
11
9
3
3
21 Note: The requirements might vary. 22 Note: Requirements might vary from bank to bank.
6% 9% 2% 18% 46% 87%
FORMALREGISTRATION*
BANKACCOUNT**
BUSINESS PLAN
FINANCIALRECORDS
COLLATERAL(SAVINGS***)
OPERATING FOR MORE THAN A YEAR
n Yesn No/Don’t know
n Yesn No
n Yesn No
n Yesn No
n Yesn No
n Yesn No/Don’t know
Note*: 6% are registered, i.e. they have a “Alvara” and “Articles of Association”, 89% are not registered, 5% don’t know.Note**: Bank account includes any bank account. 9,5% of business owners are banked, but only 4,9% use a bank account mainly for business purposes.Note***: Do you save or put money away or invest for business purposes. Other assets that could be used as collateral have not been considered here.
33
4.4 Savings and investmentsMany MSME owners in Mozambique save (46%). Only 7% save with a bank and 1% save with other formal non-bank institutions.About 18% save using informal mechanisms such as savings groups/clubs, while 27% save at home. 54% of MSME owners,however, do not save.
Banked
Formal other
Informal
At home
Excluded
7
%
1
18
27
54
Figure 35: Savings overview
In constructing the Savings Strand23 the overlaps in financial product/service usage are removed, resulting in the followingsegments as shown in the figure below:
n MSME owners who do not save (54%);n MSME owners who only save at home (24%) and do not use any formal or informal mechanisms;n MSME owners who save through informal sources (15%) such as savings clubs but do not save using formal
products/services – however, they might also save at home;n MSME owners who save through formal institutions (8%) – they might also be part of savings clubs, and/or save at home.
Comparing this with the figure above shows that there are several overlaps, especially looking at the usage of informalmechanisms (e.g. savings groups) and savings at home.
23 Note: The Savings Strand adds up to just over 100% due to rounding.
n Bankedn Formal other
n Informal n At home only
n Excluded
Figure 36: Savings Strand
7 541 15 24
Home
Xtique/Xtique geral
Commercial Bank
Give the money to someone for safekeeping
Commercial Bank dedicated to Microfinance
Credit Cooperative
PPN (Programa de Poupanças e Pequenos)
NGO (Non governmental organisation)
Other
61
%
23
15
2
2
1
0.5
1
1
Figure 37: Savings mechanisms (of those who save)
Savings mechanisms: Of those who save (46%), the majority save at home/secret place (61%), 23% save through aXtique/Xtique geral, and 15% save through a commercial bank.
34
Drivers and barriers: MSME owners mainly save to grow/expand their business (58%), to have money when they need it (38%),and for day-to-day running of the business (25%). 23% save for the future. The results also show that 54% of MSME ownersdo not save, mainly because of monetary reasons. Of those who do not save, 59% reported that the business is not makingenough money to save, while 32% claimed that all the money is put back in the business and hence there is no surplus to save.
Figure 39: Reasons for not saving (key barriers)
The business is not making enough to save
All money is put back in the business
Do not believe in saving
Other
59
%
32
11
5
Figure 38: Reasons for saving (key drivers)
To expand the business
To have money when I need it
Money for day-to-day running of the business
For the future
Other
58
%
38
25
23
8
4.5 Insurance and risk managementMSME owners face a number of risks, such as the following:
n Natural disasters (rain/floods and fire) as experienced by 14% of MSME owners;n Illness of the business owner (21%); andn Theft of livestock (11%).
Given the high percentage of business owners who work in the agricultural sector and the high risk for natural disasters, theremight be a need for affordable agricultural insurance.
Figure 40: Main risks
Flood, fire or natural disaster destroys business premises
Illness of owner
Theft of livestock
Rain damage
%
1418
21
14
11
13
13
12
Despite these risks, the large majority of MSME owners (99%) are not insured.
n Experienced risksn Perceived risks
35
Barriers: Key barriers to insurance uptake relate to lack of knowledge about insurance. 34% reported that they do not knowif there is any insurance like this, 19% do not know where to get insurance, and 19% do not know how to get insurance. Thatindicates the need for and advertising of affordable and accessible insurance products that are specifically designed to meet theneeds of MSME owners (e.g. insurance against fire and water damage).
Do not know if there is any insurance like this
Do not know where to get insurance
Do not know how to get insurance
Do not need insurance
It is not insurable
Insurance is too expensive
Other
%
34
19
19
18
11
9
9
Figure 41: Reasons for not having insurance (key barriers)
36
5 Key challengesKey challenges mentioned by MSME owners mainly refer to finance during start-up, management and operation, as well asgrowth.24 Other challenges include sales and marketing, lack of resources, legal issues, and having too many competitors.
5.1 Starting the businessIn total, 56% of MSME owners reported to have problems sourcing money when starting their business. Other challenges duringthe start-up phase include difficulties with sales and marketing (as reported by 42%), not having enough resources (23%) andlegal issues (4%).
Figure 42: Main constraints to starting the business
Finance
Sales and marketing
Resources
Legal issues
Skills and staff
Other
None
56
%
42
23
23
4
2
6
The majority of MSME owners (48%) required MT 2 500 or less to start their business and 27% did not require any money.A further 15% required between MT 2 5001 and MT 10 000. Only 6% required more than MT 10 000 to start their business.
Those who did require start-up capital, mainly generated it themselves (70%), including own savings and money from otherbusinesses, while 22% borrowed money mainly from family and friends.
24 Note: MSME owners were asked to list all the challenges they experience during start-up and operation/management (multiple mentions) – hence, thegraphs add up to more than 100%. Growing the business, however, MSME owners were asked to name the most important challenge (single mention)– as such the graph adds up to 100%.
Figure 43: Finance required for starting the business
Over 50 000 MT
25 001 – 50 000 MT
10 001 – 25 000 MT
2 501 – 10 000 MT
1 – 2 500 MT
None
Don’t know
%
1
3
27
15
48
2
4
The motivation to start a business is mainly driven by the need to secure livelihoods, rather than seeing an opportunity. 63%of business owners reported that their main motivation to start their business was driven by economic need (e.g. to providefor their families, to escape poverty and unemployment), while only 18% actually saw an opportunity. However, MSME ownershave low levels of income but high levels of dependency with 56% having a personal monthly income of less than MT 2 500.84% of the MSME owners reported that their business is the only source of income. 75% are heads of households and oftenthe main income earner. This needs to be taken into consideration when looking at business growth and sustainability.
37
Own money sources
Loans/money from others
Not specify/other
70
%
22
8
Mainly generated from another business andown savings
Mainly rely on family and friends
Figure 44: Main sources of money to start the business
Case study 4: Tania, young entrepreneur
Tania, young entrepreneur
Tania is 34 years old and lives with her husband and twin sons. She runs a successfulbakery which she started mainly from her own savings. The capital was generatedfrom a previous businesses providing telephone cabins of fixed lines and selling pre-paid sim cards for cellphones. Tania has a number of formal financial products andservices, such as a personal bank account, a bank account in the name of the business,as well as insurance (for her employees, business, and personal insurance). However,she has never taken a bank loan.
“We can start with what little we have, not wait for big capital investments, but focus ongrowing our little bit step by step.”
The bakery now employs almost 100 people.
Figure 45: Motivation to start the business versus realities
Motivation to start the
businessLow levels of income High dependency Sustainability
• 63% of business ownersreported that their mainmotivation to start their businesswas driven by economic need(poverty and unemployment),and
• only 18% actually saw anopportunity
• 56% have a personalmonthly income of lessthan 2500 MT
• 84% reported that theirbusiness is the onlysource of income
• 75% are heads ofhouseholds and oftenthe main income earner
• 47% would close theirbusiness if they wereoffered paidemployment (33%disagreed)
38
5.2 Operation and managementIn terms of daily operation and management of the business, finance (especially in terms of cash flow) is perceived to be thebiggest challenge as reported by 64% of business owners. About 50% reported to have challenges with sales and marketing.30% of MSME owners had problems with resources (including a range of issues such as finding operational and storage space,as well as connecting water and electricity). In addition, MSME owners (2%) reported a lack of skilled staff. Employees of MSMEowners tend to have low levels of education (75% of employees have primary education or less, including 21% who do nothave any formal education), limited business experience (84% of employees are 30 years or younger), and are embedded innetworks of family and kin (30% of employees are family members). The figure below summarises the challenges reported byMSME owners.
Finance
Sales and marketing
Resources
Legal issues
Skills and staff
Other
None
%
50
30
9
7
2
64
3
Figure 46: Main constraints to managing the business
In addition, the existing business acumen of MSME owners needs to be taken into consideration. Business acumen here isdefined as ‘the keenness and quickness in understanding and dealing with a business situation in a manner that is likely to leadto a good outcome’ (Reilly and Reilly 2009:1)25. As business acumen cannot be measured directly, various proxies are used toestimate levels of business acumen. These indicators include the following: levels of education and skills training, businessexperience (here: age of MSME owners), their understanding of financials, access to formal financial services, their level of(in)formality, their use of marketing techniques in promoting their business, as well as various attitudes and perceptions.
Education and skills training: As previously mentioned, levels of education are relatively low in Mozambique compared to othercountries in the region. As such, 85% have primary education or less (including 15% who have no formal education). Themajority (67%) taught the necessary business skills themselves or while managing the business, while only 1% acquired the skillsthrough a training programme, which indicates the need for tailored business skills and management programmes.
Business experience: Many MSME owners are young (41% are 30 years or younger) which might indicate a lower level of(business) experience. In addition, the majority of businesses are young (66% are in operation for 5 years or less).
Understanding of financials: The majority of MSME owners (82%) do not keep financial records, and only 1% reported tohave up-to-date financial/accounting records. 14% did not know their turnover, and only 2% have a written business plan. Thatmight be related to the nature of the business (small-scale, survivalist businesses) and/or the lack of financial literacy/capability.The insufficient understanding of financials affects operation and management of the business on a daily basis. In addition, itaffects future planning and hence sustainability and growth of the business which indicates a great need for support in this area..
Access to formal financial services: The majority of MSME owners do not have a bank account for business purposes whichprevents them from saving and/or borrowing from commercial banks. Only 0.3% have a separate business bank account inthe name of the business. Often, business and personal finances are mixed up, which affects financial management of thebusiness.
25 Reilly, Dr. Raymond R and Reilly, Dr. Gregory P. 2009. Building Business Acumen. In: HR West, December 2009. Available [online] at URL:http://www.acumenlearning.com/public/images/uploaded/reilly-building_business_acumen-hrwest1209.pdf
39
Informality: 94% are informal, i.e. they are not registered which does not mean that they are less business savvy. However,formalisation of the business requires a relatively large sum of money and a number of documents which the majority of MSMEowners do not have.
Limited use of sophisticated marketing strategies: The majority of MSME owners (56%) rely on word-of-mouth to advertisetheir business, and 36% do not market or advertise their business at all – which indicates a great need for support in this area.Sales and marketing has been reported as a major challenge.
Attitudes: Despite the challenges mentioned above, the majority of MSME owners have positive attitudes towards theirbusiness. 61% are decisive (agreed with the statement: if you make up your mind to do something you do not let anythingstop you; and you are happy to take charge of and see things through), 52% are flexible if further change is warranted in thefuture (agreed with the statement: you would easily consider venturing into a new business), and 56% regularly assess theircompetitors.26
5.3 Growing the businessThe most important constraint to business growth refers to insufficient infrastructure as reported by 47% of MSME owners.Every fifth MSME owner (20%) has access to water, but only 2.5% have access to water inside their premises; 19% have accessto sanitation, but only 2.9% have toilet facilities inside their premises; only 6.7% have access to electricity. In addition, insufficientinfrastructure affects access to formal financial institutions. 15% are not banked because banks are too far away. 63% of MSMEowners in rural areas have to travel more than 1 hour to reach the nearest bank.
The second most important constraint to business growth relates to access to finance, as reported by 13% of MSME owners.That does not mean only 13% of MSME have problems with finance. However, only 13% perceive that as the main issue whilethe majority struggle with insufficient infrastructure. That means not having access to water and electricity is more problematicto business growth then access to finance. Many MSME owners rely on savings and other forms of income to finance businessgrowth.
26 Compared to other countries, however, attitudes towards the business are more positive. For example, in Zimbabwe (FinScope MSME Survey 2012),83% decisive (agreed with the statement you are happy to take charge of and see things through), 68% are flexible if further change is warranted in thefuture (agreed with the statement: you would easily consider venturing into a new business), and 75% regularly assess their competitors. In Malawi(FinScope MSME Survey 2012), 81% are decisive, 68% are flexible, and 72% regularly assess their competitors.
Figure 47: Most important constraint to growing the business
Infrastructure
Finance
Competitors
External risk
Business environment
Legal issues
Staff
Other
Don’t know
None
47
%
13
9
4
2
2
1
6
4
12
40
Sustainability versus risk diversification: As mentioned above, businesses are relatively young (66% are in operation for 5 yearsor less) which indicates high mortality rates and sustainability challenges. In fact, 52% of MSME owners are worried that theirbusiness will shut down (29% disagreed). While 47% would close their business if they were offered paid employment (33%disagreed), 52% would easily venture into a new business (27% disagreed). Survivalist businesses might prefer to invest into anew business instead of growing the existing one in order to diversify the risk.
Case study 5: Cacilda, versatile business woman
Cacilda, versatile business woman
Cacilda is 51 years old living with her husband, two sons and daughter-in-law. Cacildais involved in several business activities, including events management, catering (forindividuals and companies), chicken farming, the production of cement blocks, and therental of a truck the family owns. In addition, she is planning to buy a tractor forrental purposes, and to dig a well to improve access to water in the area. The factthat she pursues so many business activities makes her feel more secure “because if one does not well others can compensate”.
The majority of businesses in the sector can be classified as so called ‘survivalist entrepreneurs’ with limited growth potential,as measured by a number of proxies, e.g.:
n They have no employees (93%);n They are necessity-driven (63%);n They have low levels of income (56% have a personal monthly income of less than 2 500 MT) and a large number of
dependents (and as such an obligation to share income generated rather than to re-invest it in the business);n They have low levels of business acumen (as measured by a number of proxies such as education and skills, business
experience, understanding of financials, levels of formality, and use of sophisticated marketing strategies); and n They are characterised by high mortality rates/sustainability challenges (as measured by the age of the business – 66% are
in operation for 5 years or less).
Would easily consider venturing into a new business
Would close the business if offered paid employment
Worried that their business will shut down
In operation for less than 5 years
52 27 21
47 33 20
52 29 19
66 34
%
Figure 48: Perceptions of MSME owners
n Yes n No n Don’t know
6 Conclusions and recommendationsThis study found that the sector is driven by individual entrepreneurs and micro-enterprises. The majority of MSME ownersare located in rural areas, mainly engaging in retail and wholesale related activities, which are largely driven by male entrepreneurs.Uptake of formal financial products and services is particularly low (especially in rural areas), and financial inclusion is driven byinformal mechanisms (e.g. savings groups, etc.).
The MSME sector plays an important role in addressing unemployment in Mozambique with a total of 5.4 million peopleworking in the sector (including the MSME owners). That means that almost every second adult in Mozambique engages inMSME activities.27 The sector also contributes significantly to poverty alleviation. Although effects on wealth creation arelimited given the low levels of income among the majority of MSME owners – survivalist businesses play a vital role as a bufferagainst slipping into deeper poverty and reducing individual and household vulnerability.
Given this crucial role of MSMEs, and especially of survivalist businesses, it is imperative to create an enabling environment byputting into place strategies to support upward mobility and growth of these businesses to mature into more sophisticatedformalised enterprises. To do so, it is important that these interventions are targeted. MSME support programmes can onlybe meaningful if they target specific segments within this broad sector that range from informal survivalist businesses to formal,more sophisticated small- and medium-size businesses (see BSM).
Furthermore, it is important that interventions are evidence-based. However, the lack of accurate and reliable information aboutthese businesses and the challenges they face, have been identified as the key constraints in achieving this objective. There isan information gap especially for businesses that are not registered and as such have not been captured in the system (94% ofMSMEs)28. This information gap particularly relates to the “real” size29 and scope of the sector (i.e. how many people engagein which business activities, why, how, and where) and most binding constraints to MSME development (i.e. what are the keychallenges MSME owners face and how can they be addressed). This information gap could be a stumbling block in terms ofidentifying and designing appropriate support programmes for the whole sector, determining policy direction and relevantfinancial products and services to address the needs of the MSME owners in Mozambique.
This survey builds a comprehensive body of evidence focusing on MSME owners (especially individual entrepreneurs andmicro-businesses both formal and informal) and their financial needs, and has identified the following challenges andrecommendations thereafter.
6.1 General recommendationsNeed for interventions that focus on growth and sustainability: The age of the business can be used as a proxy forsustainability/maturity of the business given the lack of other baseline data30. As found in this survey, the majority of businessesare young (in operation for 5 years or less). Limited upward mobility and sustainability of businesses has been associated withmany factors, including the effects of policy and regulations directed at the MSME sector, the macroeconomic environment (e.g.the availability of paid wage employment versus the need to take up self-employment/entrepreneurial activities, lack ofinfrastructure), and industry specific factors. In addition, individual characteristics of the MSME owner play a vital role. As such,business success is based on clear and positively motivated business intentions. As found in this survey, however, the motivationto start a business is often driven by need (to provide for their family, unemployment, poverty etc.) rather than seeing anopportunity. It is apparent that a large number of adults in Mozambique are compelled to enter informal/survivalist/necessitydriven self-employment. Many MSME owners would therefore take up paid employment (if offered) or venture into a newbusiness. As such, most profits are absorbed by the household to smooth consumption (the majority of MSME owners areheads of households; often the business is the only source of income), or invested into other business activities rather than intothe core business to diversify risk. By design, many of these entrepreneurial activities are not motivated by growth but bysurvival. Interventions focusing on business growth and sustainability need to take these issues into consideration as part ofthe strategy exploring factors that are required to transform entrepreneurial survivalist activities into sustainable businesses.
41
27 MSME owners aged 18 years and older and employees aged 16+ = Total 5,4 million people (about 49% of Mozambique’s adult population)28 The World Bank Enterprise Survey 2007 explores formal small- and medium-size businesses in Mozambique. Country profile is available online at URL:
http://www.enterprisesurveys.org/~/media/FPDKM/EnterpriseSurveys/Documents/Profiles/English/mozambique-2007.pdf29 “Real” size here refers to the total number of business activities in the country, including informal businesses (not registered/licensed) and individual
entrepreneurs. Often, estimations of size only include larger, more formal businesses and as such capture only a small proportion of the sector (giventhe fact that the majority of businesses are informal and very small).
30 Data generated from this survey can be used as a baseline. Following a repeat survey it can then be compared, assessing the maturity of those businesses(higher percentage of businesses in the growth and mature phase).
42
31 Similar results were found in the FinScope Consumer Survey 2009. Only 15% of adults (16 years and older) attained a level of education at secondarylevel or higher.
32 The FinScope Consumer Survey 2009 found that more than half of adults residing in rural areas did not know what a bank was.33 World Bank 2012. Diagnostic Review of Consumer Protection and Financial Literacy. Available [online] at URL:
http://responsiblefinance.worldbank.org/~/media/GIAWB/FL/Documents/Diagnostic-Reviews/Mozambique-CPFL-Vol-I.ashx The CPFL Review is partof the World Bank Program on Consumer Protection and Financial Literacy, which seeks to identify key measures in strengthening financial consumerprotection to help build consumer trust in the financial sector and confidence.
Business incubation might be a useful intervention particularly for micro-businesses that show growth potential, providingpromising start-up businesses with a set of facilities (e.g. physical space, shared services, business and legal advice, and financialinputs) to assist their creation and support them until “graduation”, when they have the capacity to survive in the outsidecompetitive environment.
Need for education and training: This cannot be stressed enough in the Mozambique context. Entrepreneurial action islinked to education, business acumen and sound business management skills. Although not directly measured in this survey, itseems that many MSME owners have low levels of financial capability, i.e. the lack of “awareness, knowledge, skill, attitude andbehaviour necessary to make sound financial decisions and ultimately achieve individual financial wellbeing” (OECD). This includesa number of domains, such as the following:
n Managing money and keeping track: The majority of MSME owners do not keep financial records (82%) and many did noteven know their turnover (14%). Often business and personal finances are mixed up.
n Choosing and using financial products/services and mechanisms to manage business finances: Only 25% of MSME ownersare financially included, i.e. use financial products and mechanisms (formal and/or informal) to manage their business finances.Only 9.5% of MSME owners are banked.
n Accessing information: The majority of MSME owners in Mozambique have low levels of education (85% have primaryeducation or less31) and many of them rely on their own networks (friend, family, and other MSME owners) to acquire thenecessary business skills or taught themselves (67%). Only 1% acquired the skills through a training programme. Giventhe low levels of general education and formal skills training, there might also be an issue with accessing information aboutfinancial matters as well as lack of financial awareness. For example, 99% of MSME owners do not have insurance despitenumerous risks they face, mainly due to a lack of knowledge around insurance, i.e. don’t know if there is insurance like this(34%), don’t know where to get it (19%), don’t know how to get it (19%). This might also be the case for other financialproducts and services, although not explicitly mentioned by MSME owners.32 As could be expected, a very close positiverelationship was found between the proportion of the formally banked and levels of education and income.
Financial capability enables people to take advantage of and benefit from financial services. Without improvements in financialcapability, financial inclusion can pose risks to the financial sector stability as well as the financial wellbeing of individuals andMSMEs (World Bank 2012).33 Hence, appropriate and relevant interventions need to be designed timeously, at different phasesof the business life cycle taking into consideration different audiences.
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Financial education for MSME owners: For MSME owners, three broad categories can be identified, namely the start-ups,survivalist businesses (which are the majority of MSME owners), and established businesses. Basic concepts that should beincluded here focus on entrepreneurial and basic MSME management competencies, accounting and financial managementsystems, looking at business versus personal finances (only 0.3% have a separate bank account in the name of the business),and different financial services options (e.g. mobile banking, tailored insurance). In addition, MSME owners require a basicunderstanding of financial regulations, legal and tax issues, and understand related resources they can resort to in a situationof financial stress.
Financial education at school level: Further, financial education should also be addressed at an early stage through schoolsand targeted training programmes (e.g. young entrepreneurs) to unleash entrepreneurial talent among the youth andcontribute to upward mobility for the next generation (intergenerational effects). As such, the new national educationstrategy was approved in June 2012 focusing on improving the quality of education. For the next five years, priority will begiven to a range of areas, such as improving early-childhood development and primary education, literacy and adulteducation, diversifying the education supply, including the encouragement of private providers, community schools andscholarships for vulnerable groups, as well as the promotion of alternative training and vocational education, in particularin the new areas of economic activity.
These interventions require the involvement of all stakeholders including Government (i.e. Bank of Mozambique), theprivate sector (i.e. financial service providers such as banks and non-bank institutions, media), as well as the civil society sector(i.e. NGOs and donor community). And although a wide range of public and private initiatives on financial education exist,coordination is lacking and there is no over-arching strategy. Interventions should be guided by an overall framework onfinancial literacy and consumer protection. However, at the time of this study, only a minimal legal basis for financial consumerprotection exists and lacking capacity to monitor and enforce existing initiatives is problematic.34
Need for linkages: It is recommended to connect MSME owners to larger, well established businesses who can act as mentorand create a relevant business network, providing contextual learning opportunities and partnerships. This network supportmight also increase the probability of survival and growth of newly founded businesses. Other business linkages efforts includethe involvement of MSME owners in megaprojects, and linkages to established businesses in neighbouring countries such asSouth Africa. USAID (2012)35 conducted a business linkages review which focuses on collaborative business linkages, e.g.Mozlink. Business linkages might be particularly useful in the agricultural sector. Although the majority of the rural populationare involved in agricultural activities, levels of productivity are very low. Widespread facilitation of linkages between agriculturalmicro-businesses and markets, as well as catalysing and facilitating the development and implementation of private sector-ledgrowth in rural areas (e.g. grower’s schemes and value chain-based support programs) will help to unlock the potential of thecountry’s agricultural sector and address regional imbalances.
Need to support women in business: As shown in this survey, the majority of MSME owners are male; however, the majorityof unpaid workers are female. Levels of financial inclusion are higher among women compared to men, and women are morelikely to use financial products and services. Considering traditional gender roles within the households (i.e. women collectfirewood and water, child bearing/minding responsibilities, etc.), women would benefit disproportionally from improvements inbasic services and infrastructure. Given this gender bias, there is a great need to support women in business.
Need for infrastructure upgrades: Improving water, sanitation, electricity, and transport connections would benefit all MSMEowners, but particularly survivalist entrepreneurs in rural areas. As such, the Government has ambitious plans for the expansionand overhaul of the country’s infrastructure, including various port, power, road, and rail projects.
34 For more information please refer to the World Bank 2012. Diagnostic Review of Consumer Protection and Financial Literacy. Available [online] at URL:http://responsiblefinance.worldbank.org/~/media/GIAWB/FL/Documents/Diagnostic-Reviews/Mozambique-CPFL-Vol-I.ashx
35 Available online at URL: http://www.cta.org.mz/lib/Estudos/Ambiente%20de%20negocios/GB/2012-SPEED-REPORT-MOZLINKAGES-REVIEW-EN.pdf
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Need for formality and matching costs versus benefits: For the purposes of this survey, the term ‘informal businesses’ refersto enterprises that are not registered and/or licensed with any government institution within Mozambique. Uncertainties, thescale of business activities, as well as the costs and complexities of registration affect the motivation to formalise the business.This is a particular issue where educational levels are low and entrepreneurs have to engage help in completing the paperworkrequired (85% of MSME owners have primary education or less). Owners of survivalist businesses might not see the need forregistering their business activities as the associated cost registration36 and compliance might exceed the limited income.Further, there are low levels of awareness as to what the benefits of registration are. To reduce complexities and travel costs,it might be useful to introduce a ‘one-stop-shop’ model where MSME owners can register/license their activities in one go. Inaddition, incentives such as support with writing a business plan, access to finance, operational space, and new customers (i.e.marketing) could be offered. There is need to ensure that MSME owners understand the importance and benefits of registeringtheir businesses, the process is transparent and easy, and that the cost is affordable. There is an opportunity to come up withincentives and a formalisation model which would suit the needs of the sector while contributing towards their financial inclusion.
6.2 Financial inclusion specific recommendationsThe low levels of financial inclusion and uptake of (formal) financial products and services in Mozambique indicate the greatneed for appropriate financial products (savings, borrowing, and insurance), i.e. accessible (given the proximity issues to formalfinancial institutions and service points), affordable (given the low levels of income), flexible (given the irregularity of incomeand seasonality), and simple (given the low levels of education) and at the same time promoting financial capability (especiallyrecord keeping and future focused planning).
36 The cost of registration is summarised in the World Bank Doing Business Report. Available online at URL:http://www.doingbusiness.org/data/exploreeconomies/mozambique#starting-a-business
Cost and complexity ofregistration process• Relatively fast (about 13 days)• At least 3 000 MT• Multiple steps
Perceived benefits of registration• Law compliance• Avoid harassment from authorities• Avoid fines
3 Reduce registration costs3 Communicate registration process3 Reduce complexities
Incentives:3 Help to access finance and operational space3 Education and training (e.g. help to compile a
business plan)3 “One-stop-shop”
Figure 49: Need for formalisation – costs versus benefits
Reasons for not registering/license• Business to small, no money• Don’t know how, too complicated
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Need for credit/loans: Only 1% of MSME owners in Mozambique borrow from a commercial bank. In a predominantly cash-based economy37 such as Mozambique, where access to formal financial services is problematic (as income is too small /irregular, or banks are too far away), managing enterprise liquidity presents a number of challenges. Access to finance wasreported as a key challenge when starting, managing and growing the business. Lenders have a range of requirements – manyof which the majority of MSME owners do not fulfil, such as formal registration (6% of MSME owners are registered), a bankaccount (9%), a business plan (2%), and financial records (18%). Although many MSME owners save (and these savings couldbe used as cash collateral) information about the amount of savings is not available. From a supply-side perspective, theserequirements and other information are needed to establish credibility of the business and to be able to calculate the riskaccordingly. As already known, the lack of reliable information is linked to the high administrative costs of small-scale lending.Credit markets are segmented by the relative costs of engagement for the provider – as these costs rise, the provision ofcredit declines. Although this is not the only determinant of credit markets, but the lack of information is an important elementto consider here. Using existing business models, where the information normally used to assess risk is absent, risk evaluationbecomes less robust and the risk assessment process becomes based on uncertainty, thus raising the cost of the engagement.Efforts that assist in furthering the access to information required by credit providers will contribute to reducing the barrierof access to credit for MSMEs.
Need for accessible low-cost banking products: The cost of services (including bank charges and minimum balance) appearsto be a problem among MSME owners in Mozambique. Low-cost or free accounts for the lowest income market segmentwould be a way to boost the financial inclusion of the very poor. This type of service could also be vital for enabling peopleto save through formal mechanisms and build an asset base.
Need for mobile financial services: The low levels of formal financial inclusions and the proximity issues to formal financialinstitutions (banks are too far away) indicate an opportunity for mobile financial services. A shift towards greater intentionaland appropriate use of technology, enabling electronic transactions brings material benefits to governments, private sector,individuals and communities—in terms of reduced costs, improved transparency, enhanced security, and access to financialservices. Advances in technology and recognition of the benefits of innovation in electronic payment provide the opportunityto look beyond the traditional brick-and-mortar bank branch models of servicing customers. Even though mobile phones arenot as prevalent in Mozambique as in other African countries (only 20% of MSME owners claimed to have access to cellphones),the number of mobile phone users continues to grow, and users are becoming more receptive to mobile phone-baseddevelopment communication campaigns (such as SMS-based education). Alternative distribution channels, such as mobile vansand retailers should also be considered. From a policy and regulatory perspective, attention is necessary to ensure that thereis an enabling environment for these agent-led ‘beyond branch’ models (e.g. mKesh or MPESA) to develop, which requiresunderstanding of the money management habits and economic networks of MSME owners. Consideration is required on howfar the regulation should go in determining the branchless banking framework, which models of branchless banking areeconomical and should take into account how far they will go in reaching the unbanked or under-banked population.
Need for agricultural finance and insurance: As shown in this survey, many MSME owners engage in agricultural activities (22%).Given the seasonal nature of this work and the high vulnerability due to various risks such as natural disasters and low sellingprices, most MSME owners face uncertainties (and as such are often not able to employ full-time staff). Although more peopleresiding in rural areas rely on farming and fishing, access to agricultural finance and insurance is limited. There is a need foraffordable and flexible solutions, including loan and savings products to cover seasonal input (e.g. fertiliser, seeds, labour, etc.)and fixed assets (e.g. tractors, implements, land improvements). In addition, there seems to be a demand for tailored affordableagricultural insurance and this could help to address some of the risks and uncertainties MSME owners face (e.g. naturaldisasters) and could help to address some of the risks and uncertainties MSME owners face.
Need to leverage informal financial services: Many MSME owners in Mozambique use informal mechanisms to manage theirbusiness’ finances. As such, informal services such as savings clubs play a vital role in the financial services continuum, often asprecursors for those who cannot be reached formally. Informal services are often used throughout and beyond the transitionfrom informal to formal. But ultimately, informal services become marginal or supplemental. For MSME owners in Mozambique,the move to formal brings a number of advantages that informal cannot provide. Principle among these is the element ofcredibility. This element extends from funders (access to credit), to potential investors or business partners, to customerengagement. A formally registered business, for example, that implements some prudentially accepted level of accountmanagement and reports to a regulatory body give certainty to stakeholders engaging with the business. In addition, consumersgenerally should have access to some level of consumer protection where a business is formally registered, providing consumerswith added comfort in engaging with the business.
37 The majority of MSME owners are paid in cash. They pay their employees in cash. And banking is driven by cash related transactions such as cashwithdrawals and cash deposits.
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Appendix A: Survey methodology and approachDefining MSMEs In this survey, MSMEs are defined by the number of employees according to the ‘Estatuto Geral das MPMEs’. This definition refers toindividual entrepreneurs (without any employees), micro-businesses (those with 1 to 4 employees), as well as small businesses (5 to49 employees) and medium-size businesses (50 to 100 employees38). This study also includes agricultural activities if 50% or more ofthe produced goods are sold.
QuestionnaireThe FinScope Small Business Survey methodology was first piloted in South Africa in 2006. It has since been implemented in Zambia(2008), Tanzania (2010), South Africa (2010), and Zimbabwe (2012). The South African questionnaire was used as a benchmark forthe Mozambique MSME questionnaire and then adapted to the Mozambique context. The design of the questionnaire, which was guidedby the Steering Committee, involved a range of stakeholders in a syndicate, thereby enriching the survey tools through a process ofcross-cutting learning and sharing of information. The final questionnaire was signed off by all parties involved. It was then translatedfrom English into Portuguese. The questionnaire tool includes the following broad sections.
38 The term ‘employees’ here includes all people working in business – both paid and unpaid (excluding the business owners).
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Topic
Introduction and screening
ADemographics
Age, gender, education, language, nationality, etc.
BNature of the business
Economic activity, ownership, location etc.
CGetting involved in your own business
Reasons for opening the business, main constraints, etc.
DEmployees in the business
Number of employees, nature of employment, labour relations, etc.
ECustomers and tendering
Client base, marketing practices, participation in tendering processes etc.
F Registration/compliance of business
GFinancial product penetration
Usage of financial products (formal and informal)
HBanking penetration
Usage of banking products, main constraints
ICredit and loans
Usage of credits and loans, reasons for borrowing, main constraints
JSavings and investments
Saving mechanism, reasons for saving and investments, main constraints
KRisks and insurance
Main risks (perceived and expereinced) and coping mechanisms, usage of insurance products
LMoney management within the business
Transactions, terms and conditions, etc.
MRecord keeping
Methods of payment, financial record keeping processes, business turnover etc.
N Import and exports
OSmall business support
Awareness of and access to small business support mechanisms
P Skills of the business owner/company resources
QPsychographics and business performance
Perceptions and attitudes regarding business performance, and main constraints
RIncome
Personal income, business turnover
Table 5: Questionnaire structure
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SamplingA multi-stage sampling approach was used. The survey was designed to provide reliable estimates at provincial and national levels. Alist of all census enumerator areas (EAs) was obtained, stratified by region and urban/rural, as shown in the figure below.
Household
BusinessOwner
BusinessOwner
BusinessOwner
BusinessOwner
BusinessOwner
All PSUs are stratified according tourban/rural
PSUs are selected on probabilityproportional size (PPS) within theurban/rural strata
Listing of all households in theselected EA
Listing of all business owners (aged 18years and older) within the households
Selection of one business owner per qualifierhousehold using the Kish Grid
(Random selection of 6/8 qualifier households per EA
All PSUs (EAs)per province
Urban PSUsRural PSUs
Household Household
PSU 1 PSU 2 PSU 3 PSU 1 PSU 2 PSU 3
From each selected PSU one EA ischosen using PPS (total number ofhouseholds within the PSU)
EA 1 EA 2 EA 3 EA 4 EA 5 EA 6
Household
Figure 50: Sampling approach
Primary Sampling Unit (PSU) = 2 – 5 EAs
As a result of this approach, a total of 523 EAs, including 162 urban and 361 rural areas, were sampled using probability proportionalto household size (PPS) based on the Master Sample 2010 (updated Census 2007 data). All households in the selected EAs werelisted. Within the households, all small business owners 18 years or older, i.e. those who perceived themselves to be businessowners/generating an income through small business activities and with less than 100 employees, were identified. This was used as themain sampling frame. Within each selected EA, six rural qualifier households and eight urban qualifier households were systematicallyselected from the listed households with small business owners.
Allocation of EAs Allocation of households
Province Urban Rural Total Urban Rural Total
Niassa 8 28 36 64 168 232
Cabo Delgado 10 40 50 80 240 320
Nampula 26 56 82 208 336 544
Zambezia 15 61 76 120 366 486
Tete 8 42 50 64 252 316
Manica 9 29 38 72 174 246
Sofala 11 28 39 88 168 256
Inhambane 7 28 35 56 168 224
Gaza 8 31 39 64 186 250
Maputo Province 23 18 41 184 108 292
Maputo Cidade 37 0 37 304 0 304
TOTAL 162 361 523 1,304 2,166 3,470
Table 6: Sample allocation
However, due to some challenges faced during the field work, the actual sample size was a total of 3 429 (98.8% of planned) face-to-face interviews conducted in 522 EAs (99.9% of planned).
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Training and pilotThe Portuguese version of the questionnaire was used in the training of supervisors and enumerators and was complemented by adetailed training manual. Apart from the Fieldwork Manager, a total of 12 supervisors and 77 interviewers participated in the trainingsessions held in the three regions of the country, namely Maputo, Beira and Nampula. The training was conducted by GfK with supportfrom INE, FMT and ICC. The questionnaire was then piloted internally and in the field, i.e. in Maputo city during which 45 questionnaireswere administered. Insights and feedback from supervisors during the pilot were taken into account when the questionnaire wasfinalised. The final version was adopted and accepted by all relevant stakeholders before being used in the field.
Data collection and managementThe field work took place between September and December 2012 and was conducted sequentially in the three regions ofMozambique, starting from the South to the North. The first step included a comprehensive listing exercise during which all householdsin the selected EAs were listed in order to identify households with MSME owners. As a result:
n 54 630 households were listed;n 9 695 MSME owners were identified; andn 3 429 business owners were randomly selected.
For selected households with more than one business owner, the Kish Grid was used to randomly select the qualifying householdmember with whom to complete the interview (this individual was the ultimate sampling unit).
Quality controlA monitoring system was put in place to ensure the quality and accuracy of the data collected as well as the right implementation ofthe methodology. The M&E system operated at three levels:
n GfK Intercampus supervision: Interviews were conducted in the presence of the team leader to ensure enumerators wereconducting the interviews as intended. Back checks were conducted to confirm that the interview was conducted, the accuracyof information provided, and to collect missing information when necessary. In addition, GfK Intercampus conducted spot checksand random visits to selected EAs to confirm the existence of the required minimum amount of MSME owners to be interviewedand replacement of EA if needed.
n INE supervision: INE supervision focused on confirming if selected EAs were covered by the field team, the sampling and listingprocesses, substitution of EAs and demographic information on the completed questionnaires.
n FinMark Trust supervision: To complement the above mentioned activities, FMT also conducted supervision missions thatconsisted of the following tasks: (i) confirmation of area selection, (ii) testing the sampling process, i.e. if the listing was doneproperly and if the number of planned households were interviewed; (iii) field visits to verify field teams’ implementation of thesurvey methodology and the interview process; and (iv) spot checks to validate the data in completed questionnaires, as well asthe listing information.
WeightingWeighting was conducted by INE based on the Master Sample 2010 (updated Census 2007 data). The population was then comparedwith the population projections. These figures were validated by the INE sampling unit. Details regarding the sample and weights canbe requested from INE, Mr. Saide Dade, E-mail: [email protected]
Data analysis and reportingThe analysis followed a standard analysis plan based on the questionnaire and the objectives of this survey. The financial inclusionsection, however, uses the FinScope analytical framework, which is applied to all FinScope MSME surveys for the purpose of comparativestudy (see Appendix B).
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Total business owner (BO) population = Minimum age defined by the age at which individuals can enter
into a legal financial transaction in their own capacity
Banked= BOs who have/use
financial productsand/or servicesprovided by a
commercial bankregulated by the
central bank
Served by other formal financial institutions = BOs who have/use financial products and/or
services provided by regulated non-bank formal financial institutions, e.g. insurance companies
Financially included = BOs who have/usefinancial products and/or services for
business purposes – formal and/or informal
Financially excluded = BOs who donot have/use any financial products and/orservices – if borrowing, they rely only on
friend/family; and if saving, they save at home
Formally served = BOs who
have/use financial productsand/or services provided by a
formal financial institution (bankand/or non-bank)
Informally served = BOs who have/use financial products and/or services which
are not regulated, e.g. farmer associations, savings clubs/groups,
private money-lenders
Appendix B: Analytical framework for financial inclusion
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