The Malawi Population and Census report launched last Friday has shown that nearly 23 out of every 100 of Malawi’s 17.5 million people save their money and that most of such savings are made with village banks and other meas as opposed to commercial Banks.
The census found that of the 4.2 million that have some sort of savings, the majority of them 54.2 percent use a village bank (VB), 30.3 percent commercial banks. The figures also show a rise in mobile banking as 11 percent of the people who keep their money use the service.
The census figures also show that loans are accessible to 13.7 percent (547,319 out of 3.98 million) of the households in Malawi. And that from the total number of households 1.3 percent got their loans from a bank, 10 percent from village banks with microfinance institutions, friends and other means providing the rest.
At individual level 15.4 percent (2.7 million) of people in Malawi have access to loans. Here the scale tipped sharply towards VBs in that of the 2.7 million who can get loans, 76.7 percent of them or about two million use the service followed by banks (9 percent), then microfinance institutions, friends and family and other means.
One ardent female ‘Village Banker’ who says she has used the money borrowed from her VB to make extensions to her house explains why she prefers getting money from her group.
“The interest rates are fair at 20 percent. The interests we make are shared equally at the end of the year making my savings worthwhile as I reap more than I could at my formal bank. Customer care is also 100 percent,” she said.
In a village bank members mostly women gather and contribute their money individually which then becomes immediately available to them as loans.
Justice Chimgonda-Nkhoma a development economist says the ease of access to loans has led to VBs eclipsing conventional banks.
“No bureaucracy when applying for such loans, limited paper work if any. No collateral as they mostly use social belonging. Familiarity with members of the bank is a form of security for borrowers which makes it attractive for them to borrow and save with the village banks,” he observes.
Nkhoma then while acknowledging the challenges involved in taking banking to the rural areas urges commercial banks to be innovative with different platforms through which they can serve the unbanked portion of the population.
Retired Nico Holding Chief Executive Officer, Felix Mlusu once observed that failure by commercial banks to satisfy the needs of customers, citing poor customer service, lack of competition and lack of innovation, among others has caused the phenomenon of village banks to spread like wild fire.
“If you don’t start giving the customers what they need, your market share will continue shrinking and you will wake up one day to find that village banks have taken over,” he told a bankers conference in 2016.
In their defence banks have said they offer more to the economy than village banks.