It’s barely a couple of weeks now since we had a Financial Literacy Week in this country led by the Reserve Bank of Malawi. Great initiative! Surely, it is when one notes that in this time and age, 46 out of every 100 adults are financially excluded. In other words, they do not have nor use any financial product or service. Yes, you heard me! We have such a group in this country. You still don’t believe me? Then read the latest 2014 Finscope Consumer Survey Report. Nevertheless, we should be smiling given that the figure has been falling over time because in 2008 it was 55 out of every 100 adults. What is saddening though is that lack of awareness on financial products and services offered by the formal finance sector tops the list of the barriers behind this financial seclusion.
Oh! Interesting further is the fact that 80 percent of Malawians don’t use mobile money because they are unaware of it. So when the Reserve Bank of Malawi, just like their Uganda Central bank colleagues are doing, target financial literacy as the evil that needs to be tackled in addressing financial inclusion, we do give thumbs up! But shall we see the fruits of this initiative anytime soon? Mmmmh! Like you, we are all hoping for the best. Not that I am cynical or pessimistic – on the contrary I believe this country has the capability to achieve accelerated financial inclusion. However, we will have to look beyond financial literacy. The barriers to financial inclusion are multifaceted.
By the way, lack of awareness is not the same as financial illiteracy. You see, I could not know of a particular financial product but be financially literate generally – in which case the solution would be better marketing of financial products. Relatedly, I could know of a product but not know its value or how to use it – the solution then would be product-linked information campaigns or well-designed educational interventions.
So, beyond lack of awareness and financial illiteracy, there are other barriers that need to be tackled which include cost of banking, lack of identification especially for low income individuals, lack of savings behaviour, fear of indebtedness when one obtains a loan especially with the high interest rates and low incomes. Talking of low incomes, imagine only 10 out of every 100 adults in Malawi are on salaried income while 41 out of 100 earn less than K10,000 a month. Yes, a month – I mean after working for close to 30 days.
Research results, without downplaying the importance of and need for financial knowledge, point to the need to dig deeper and find out what works or does not work when designing financial inclusion programs.
It is in light of the foregoing that Innovations for Poverty Action (IPA) Malawi and the Global Financial Inclusion Initiative (GFII) at IPA, in collaboration with the Bankers Association of Malawi (BAM) will on 20th and 21st November at Crossroads Hotel in Lilongwe be bringing reputable local and international researchers together to share findings from financial inclusion randomised evaluations conducted in Malawi and across the continent.
The bottom line is that financial inclusion is very possible in Malawi but let evidence drive the financial inclusion agenda!