Authorised Dealer Banks, Banking in Malawi

Malawi’s commercial banks have embarked on a rural-outreach drive, a development the Bankers Association of Malawi (Bam) says is in response to growing concerns that financial sector players are concentrated in urban areas.
Responding to a questionnaire this week, Bam chief executive officer, Lyness Nkungula, said almost all banks now have programmes aimed at wooing rural dwellers as part of the effort to promote a savings culture.
“In short, banks are embracing the concept of financial inclusion. The perception is slowly changing as banks have resorted to go into rural areas and relax some of the fees and we also have financial literacy (programmes) at individual bank level. You might have heard that some banks are not deducting transaction fees for the rural masses and they do not have a minimum account balance,” said Nkungula.
Nkungula said Bam has also embarked on an outreach initiative targeting rural masses. She said, through the initiative, “we will come up with products specifically packaged for people in rural areas to encourage them to come on board” as one way of making sure that “banks are reaching out to all the unbanked”.
She added that, because traditional brick and mortar banking services were more expensive, most Bam members were investing in innovative mechanisms such as armored vehicles. These vehicle visit rural areas during market days, offering people the chance to deposit and withdraw money.
“Others have gone to the extent of having kiosks in markets,” she said.
However, Nkungula noted that banks faced three major challenges in their bid to bring the unbanked on board.
“There are several factors that affect the ability to operate a banking account in rural areas. First, is the savings’ culture. In most cases, if someone operates from hand to mouth, it is not easy to save money, let alone operate a bank account.
“Second, I would say that people make choices to have an account with a particular bank or not,” said Nkungula.
Nkungula said that the third factor was people’s perceptions of bank operations, noting that most rural dwellers believe that if they deposit a certain amount of money today, they should withdraw more than the amount of money deposited at some stage without any charges.
“You see, the banks are doing business and they need to cover operating costs for the service they render to customers. That is why we have monthly transaction fees and some other banks will charge an ATM (Automated Transaction Machine) fee,” said Nkungula.
On areas that should be looked into to facilitate banks’ operations to rural areas, Nkungula suggested the laxation of some standards set by the Reserve Bank of Malawi as part of Malawi’s financial inclusion framework.
These include the regulatory requirement that the outside and inside of a banking premise meet certain standards, without which no bank is allowed to open an outpost.
Nkungula also cited the issue of infrastructure development. She said most rural areas were difficult to access due to poor road and communication infrastructures, and asked government officials to intensify road construction programmes because “banks need to disperse money in the (ATM) machines as well as the branches themselves”.
“Then, there is the issue of security. We need police units in all areas as banks are targeted by thieves. In addition, you are aware that the modern banking platforms are electronic and integrated; therefore, reliable electricity and communication facilities are pre-requisites to banking services
“We also face problems of communication facilities. While the operators are trying, there are still issues of quality, availability and reliability of the services (and) as a result banks use several service providers and technologies which are very expensive,” said Nkungula.
She said the other major challenge pertained to “perpetual” electricity black outs that adversely affect operations of the banks.
“Of course, despite that all the banks have invested in having generators on standby to help in times of need, we now do not have the fuel to keep the generators running,” said Nkungula, adding:
“Put simply, it involves a lot of stakeholders, other than banks, to go to rural areas,” concluded Nkungula.