Access to formal financial services up
Households’ access to formal financial services has jumped by 12 percentage points from 17 percent in 2013 to 29 percent in 2018, results of the latest Financial Literacy and Capability Survey have shown.
The survey results come at a time informal financial services such as village banks and chipereganyo appear to be gaining ground in the country.
The Reserve Bank of Malawi (RBM), under the Financial Sector Assistance Project, earlier this year commissioned the survey, which was conducted by A2F Consulting Group.
The survey was aimed at determining the current status in terms of financial capability levels of the population and whether consumer protection and financial literacy have resulted in desired changes in financial behaviour and attitudes of the consumer towards the formal financial services in the target group.
According to survey results, improvements in access to formal financial services are notable in both rural and urban areas.
Rural areas have seen a 14-percentage point increase in access to 24.7 percent and urban areas have likewise seen just over a 15-percentage point increase between 2013 and 2018.
In contrast with the formal sector, access to semi-formal services has remained relatively unchanged at five percent while access to informal services declined from 34 percent to 22 percent.
The results show that more people are relying on formal services, which include banks, regulated microfinance institutions, and savings and credit corporations as compared to friends, family, unregulated microcredit agencies, and savings clubs.
According to the study, demand for a bank account has increased from 29 percent to 47 percent.
“Demand for bank accounts in terms of the proportion of adults that have a bank account or are considering opening an account was also investigated. Twenty nine percent of adult Malawians indicated that they have a bank account—similar to the population with access to formal financial services and products. [About] 46.6 percent of those who do not hold a bank account are considering opening one. Also, the 21 percent of Malawians not holding a bank account, noted that they have previously used their relatives’ or friends’ accounts to gain access to financial products or services,” study results show.
On mobile money, the results show that about 89 percent of Malawians were aware of receiving money, and 90 percent were aware of transferring money using their mobile phones; yet only 48 percent and 44 percent, respectively of them used such services in practice.
Mobile financial services, according to the survey, are more commonly used in the urban sector rural areas.
As at mid last year, Malawi had over K900 billion outside the formal financial system compared to around K417 billion in the banking system.
Former Nico Holding Chief Executive Officer, Felix Mlusu, warned in 2016 that banks risk losing customers to informal institutions such as village banks due to their failure to satisfy the needs of customers.