Mozambique once had a strong network of rural banks. Since the banking sector was privatised those numbers have dwindled, leaving people little option but to hide their savings and hope.
Walking slowly with a slight stoop, Julio dos Santos, a 60 year old war of liberation veteran, groans under his breath as he climbs into his grass-thatched granary which stands precariously on four large stones. After several glances sideways he enters the compartment filled with maize grain, squats and starts to dig. Eventually he pulls out a black plastic bag tied at the end with a white cloth. Inside is a stash of dirty Mozambican notes, the equivalent of almost US$400.
Dos Santos (not his real name) who lives in the rural district of Catandica in north-west Mozambique is one of millions of villagers who store their money in the ground or in grain stores and risk it being stolen.
Jose Antonio is another Catandica resident. He sells second hand clothes in the town, which lies below a lush mountain range running along the country's border with Zimbabwe. Like Dos Santos, every time the sun sets he feels unsafe. "I start getting worried that someone might come and steal my savings and daily takings from my business," says the 34-year-old father of four.
In the town centre stands the imposing building which once housed the only bank in the area, its blue and orange colours fading out of neglect. The Banco Austral closed in 2002, after it was bought by the South African based ABSA bank. Its demise left residents in the surrounding villages with nowhere to deposit their money, forcing them to travel further afield or to risk hiding their money at home.
Mozambique once had a robust network of rural banks. At independence from Portugal in 1975 it embraced socialist ideologies, taking its cue from Eastern European countries that supported it to fight colonialism. "The old People's Development Bank (BDP) had branches in almost all the district capitals," said Joseph Hanlon, British academic and expert on the Mozambican banking sector.
But the system of publicly-owned banks fell into decay in the 1980s, discredited by inefficiency and corruption. In the 1990s following the collapse of socialism, the banking sector was privatised. The International Monetary Fund and World Bank threw their weight behind the change, insisting on privatisation of the banks as a condition of aid and loans made in the mid 1990s.
Private banks were not immune to corrupt practices. According to Jose Botao, a former government employee now working as an economic adviser for a non-governmental organisation, it was mainly the political elites who benefited from the opening up of the economy. "They used their political muscle to access loans which they never paid back," he said. "Rural people were left in the cold, unable to start any viable projects that could increase their income".
In the past few years, a number of reforms have seen the banking sector thrive. A study by the consultancy firm KPMG reveals that profits jumped 64 per cent in 2005 but the nine commercial banks opened just four new branches between them.
"While many branches have opened in Maputo, most of the rural branches have closed," said Joseph Hanlon. The figures bear this out, with around 114 branches in the capital and surrounding areas and another hundred-odd spread over the country's nine provinces.
In rural areas like Catandica not only traders but professionals such as teachers, nurses and other government workers still get paid in cash. Abigail Ernesto, a health community worker at Catandica district hospital, is furious about the bank closure. "I had a savings account but now I cannot travel to Chimoio to deposit money because the bus fare is more than the money I will end up depositing," she said.
In Escola Primaria Primeira do Maio (First of May Primary School), the teachers club together to pool part of their salaries which are kept in a safe in the headmaster's office. Bernado Alfai, a teacher, explained: "The money is lent out to members on a rotational basis. The system is very popular as some teachers have managed to pay for items they had never dreamt of buying before."
Non-profit making organisations are also trying to fill the gap in services. Aníbal Oliveira is the executive director of Ophavela, a rural microfinance association created in 2001 by Care International in the northern province of Nampula. It doubles as a simple savings club and has more than a thousand groups of between seven and 30 members who make weekly contributions.
Fion De Vletter, a consultant with the Mozambique Microfinance Facility, believes there is not enough money in rural areas to make rural banks viable: "They are expensive to run, the average peasant is unlikely to open an account and the credit disbursed will, for the time being, be limited," he said.
But this view is being challenged by the Mozambican government. President Armando Guebuza has appealed for private banks to expand into rural areas, arguing it is the shortage of banks that is holding back economic activity, not the other way round.
Carlos Domingos, an economist based in Maputo, supports this view. "The rural areas are now the hub of economic activity in the country. Most people are engaged in farming and small scale business ventures where they at times earn more than people in the cities," he said.
Joseph Hanlon believes the slow pace of rolling out banks to rural areas has its roots in the privatisation process in the 1990s. "The private banks are lazy and unimaginative and only interested in the urban sector. And the government has come under heavy pressure from the IMF and the World Bank not to intervene in the banking sector so its hands are tied. It's the biggest single bottleneck for rural development. Donors are promoting savings clubs as an alternative but this keeps everything small and short term. It's all very ad hoc, which is not the basis for development," he said.
There are some private banking initiatives making the right noises. A venture called 'Opportunity Bank' plans to introduce a network of mobile banks to rural areas in 11 African countries, including Mozambique. Over the next ten years it will implement a microfinance model tailored to the rural population, complete with satellite branches, mobile branches, ATMs and points of sale.
Until such facilities hit Catandica, people like Dos Santos will have little option but to bury their money and hope for the best.
Frederico Katerere is a freelance journalist working in Mozambique, Swaziland and South Africa.