Keeping poverty at bay

JOHN—I am a happy man

By Taonga Sabola:

Before 2019, Alfred John, now 25, was a Mr Nobody in Majuwa Village, Traditional Authority (TA) Kwataine, in Ntcheu District.

Hunger used to be a common occurrence in his family as he was harvesting very little because he was not applying fertiliser.


“I was struggling financially and fertiliser was something beyond my reach. I was living a hopeless life,” John says.

John knew he needed to start doing things differently; otherwise he would live in abject poverty for the rest of his life. He needed to start saving the little he was getting from piece-works.

After looking around, John decided to join Titukulane Community-based Financial Organisation, or village bank, where they save a minimum of K500 and a maximum of K5,000 every week.


“In my first year, I realised K150,000 which I used for buying two bags of fertiliser. From the farming I produced 80 bags of maize. I sold some and bought a brand-new motorcycle which I used to start my kabaza business.

“I also borrowed some money from the village bank which I used for buying solar propelled hair trimmers. I also bought a complete set of solar-equipment consisting a solar panel, battery and inverter,” he says.

John is now working on the floor of his house to transform it to have a concrete floor.

Kelita Edison, 48, is also a member of Titukulane CBFO and says her membership to the grouping has helped her transform the economic fortunes of her household.

According to Edison, before joining the group, she used to struggle to feed her five children but now her financial fortunes have changed.

She is now able to feed her children and send them to school with ease.

In Nkwinda Village, TA Kaphuka in Dedza, Hanna Kamtande, a member of Tikakhane CBFO, is a proud owner of a dairy cow, thanks to savings from the village bank.

The mother of four joined the banki mkhonde in 2020.

“With this dairy cow, I expect to benefit a lot once it starts producing milk,” Kamtande said.

In 2018, the government teamed up with the International Fund for Agricultural Development (Ifad), and the private sector to roll out the Financial Access for Rural Markets, Smallholder and Enterprise (Farmse) programme which works to support the graduation of poor Malawians along the poverty spectrum from ultra-poor to a productive pathway on a sustainable basis.

The programme also supports household economic development through access to financial services that are appropriate to each socio-economic level of poverty including ultrapoor, poor but food secure, vulnerable to poverty, and resilient to poverty.

For the common Malawian, typically running a smallholder enterprise in a rural market setting, where traditional banks have for decades failed to reach for reasons related to high transaction costs and risks, the CBFOs are the most accessible platform of financial services.

So far, 4,933 new groups formed and 11,411 existing groups have been reached with capacity building interventions.

Farmse CBFO Specialist Kumbukani Chawanda said about K4 billion has been provided through CBFO support projects across all districts of the country.

Chawanda said the projects have been implemented by several organisations including Heifer, Muscco, Comsip, Action Aid, Malawi Milk Producers Association, Dapp and Opportunity International Malawi.

Chawanda said Farmse is promoting the CBFO initiative because CBFOs are the most basic form of a financial organisation.

Chawanda said CBFOs are therefore a good starting point for providing local financial services such as savings, credit and emergency financing as well as building the financial literacy of community members.

According to Chawanda, village banks facilitate the formation of solidarity groups that pose a good entry point for formal financial institutions (FFIs) to provide a broader menu of financial products and services such as group loans and bundled insurance.

“The mobilisation effect of CBFOs provides a fertile platform to cascade other key development messages in nutrition, environment and gender,” Chawanda said.

Through its CBFO support projects, Farmse provides training in village and savings loans methodology, financial literacy, business management and group governance to strengthen the technical and financial capacity of the groups.

It also provides linkages to FFI where the CBFO accesses a broader menu of services and products including savings accounts, business loans, agricultural input loans, money transfer and insurance products.

In addition, Farmse supports group business development in selected high value chains such as banana, moringa, high quality cassava flour, broilers, and rice with formal financing services and linkages to high value markets such as off-takers, input suppliers and service providers to fuel economic opportunities for smallholder participation.

“The progress registered so far has been impressive. We have seen a great transition of CBFOs from being mere savings and loan groups to business groups that offer their members an array of household transforming benefits,” Chawanda said.

According to a recent mid-term programme evaluation, annual savings among CBFO members have increased by 73 percent from the programme baseline, a development which has translated into increased agricultural input financing during the share out period of December.

The review also revealed that use of loans has gradually shifted from consumption to investments in SMEs, particularly among women, which has resulted in an increase in income by 46 percent from the baseline.

Further, the review revealed that over the course of implementation, there has been a significant reduction in the number of groups that disband every year, signifying more structured and sustainable financial groups.

According to Chawanda, this could be attributed to training in governance as well as the promotion of business groups.

“The promotion of technical skills development has seen an increase in the number of youth and males participating in VSLs from a baseline of seven percent to around 23 percent at mid-term,” Chawanda said.

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