The World Bank Board of Executive Directors has approved a $40 million grant to support financial inclusion and stability in Mozambique.

This International Development Association (IDA) financing aims to support Mozambique’s efforts to increase financial inclusion among underserved groups and small and medium sized enterprises (SMEs), while strengthening the overall financial safety net.

Mozambique has moderated its pace of economic growth, which is now barely above the population growth. Real GDP growth fell from an average of 7% in 2010-15 to 3% in 2016-18.

Lower exports, fiscal consolidation, and tighter monetary policy have contributed to the slowdown, which is expected to continue for the medium term. Growth has not been inclusive and reliance on the extractive and minerals sector is not expected to generate enough income opportunities for the net annual inflow of job seekers. Efforts to allocate more resources to SMEs and to diversify the economy are necessary to support more inclusive growth.

Financial sector development is important for economic growth and poverty reduction. I am pleased with the approval of this grant, particularly given its focus on enabling and broadening access for the poor and vulnerable groups as well as facilitating risk management by reducing their vulnerability to shocks,” said Mark Lundell,

World Bank Country Director for Mozambique, Madagascar, Mauritius, Seychelles, and Comoros. “This financing will help more individuals and households have access to useful and affordable financial products and services, including basic transaction accounts, that meet their needs. This is particularly important in rural areas of Mozambique where individuals can spend as much as a week and the equivalent of 5 days wages just to collect their salary or make an electronic payment.”

This grant will increase financial inclusion by providing access to electronic transaction accounts to underserved segments of the population. A transaction account is a first step toward broader financial inclusion as it allows people to store money and send and receive payments.