Muted resilience of an unbanked majority

The mushrooming of village savings and lending groups is more than just a reminder of how formal banking sidelines the hard-to-reach Malawian who needs it most.

In the findings of Finscope, a US-based economic think-tank with antennas across the globe, only one in five people in Malawi has access to banks and other financial services. However, the financial service-providers’ penetration is worse and scarcer in the rural areas where three in four Malawians live.

It only takes a break away from the air-conditioned boardrooms and marble offices where statistics offer generalised glimpses of reality and ‘one size fits all’ tend to be rule of the thumb.

In the Northern Region, a breakaway from the comfort zone leads to T/A Mabulabo in Mzimba, a remote locality about 400km from the City of Mzuzu, for a heart-to-heart encounter with about 100 men and women who have long been crying for banks to build brick-and-mortar branches within their reach.

Costly ride to banks

Although financial inclusion has become a buzzword for the Reserve Bank of Malawi (RBM), which polices and promotes banking in the country, the locals have to travel to either Kasungu or Mzimba Boma to access banks.

With rising cost of banking, can the rural poor afford opening an account?

This question provokes murmurs in the randomly selected sample. No answers. As the suppressed sounds simmer into a minute of silence, only one man strings up and stammers: “I have…I had… I’ve an account.”

Shocking? This is not Likoma where about 10 000 people are cut away from the banking sector—a pitiful tale of two islands where the few with accounts have to wait for a week and cough an extra K5 000 to access banking services on the mainland.

The stand-out person, Blessings Chisale of Balaba Village, opened the bank account with NBS Bank in Kasungu six years ago.

The real shock is not that the tobacco grower is the sole adult with a bank account in the crowd. Rather, he had to wait for what he considers the largest amount in his lifetime to realise banking matters—a reflection of how banks’ slow steps out of their urban headquarters have left the rural poor misinformed that the sector is exclusively for well-to-do townspeople.

“In 2008, we had good rains and the tobacco harvest was so good that I realised K120 000. It was the highest amount I have ever touched. I had to open an account because I would have exposed it to thieves and wistfulness it I kept it home,” said Chisale of how he took the K3000 trip to Kasungu where the banks are concentrated.

The assertion reflects the widespread myths that a bank is no more than just a storeroom for money. Unsurprisingly, Chisale’s enthusiasm seems to have diminished with the money that he deposited in the said account.

“Money is hard to find in the village, but you have to spend an extra K3 000 to get to and from the bank. In between, you waste nearly an hour filling forms and queuing to deposit or withdraw your money,” he laments.

The rural dweller’s experience mirrors a common feeling among Malawians even in cities where banks are headquartered and concentrated.

Small savings, big loans

The delays and paperwork can be more daunting when one need a bank loan either to buy assets of capitalise a business. Banks charge an interest rate of about 45 percent a year and the add-ons on the pay-back amount can be higher when it comes to microfinance companies which criss-cross the rural area dishing loans that run up to four years. Some people have had their hard-earned property for failing to repay the microloans.

However, ordinary solutions bring ordinary results. In Mabulabo and other districts, the portraits of the country’s unbanked rural populations seem tired of the same cry which left them stagnant in the same old problem—costly access to banking.

The drawbacks has compelled the financially cutaway communities to embrace village savings and lending (VSL) clubs, an unconventional model which is spreading fast in the countryside where many prefer calling it Mudzi Banki (village banks) because it gives them the ease to put together their change and offer each other credits at almost half the formal bank rate.

“With banks situated faraway, it has always been easy to waste the money we sweat for every day. But since the coming of village banking groups, people are able to save a little for future use and business purposes,” says Grace Zimba, who belongs to Tapiwa Group formed with support from the Church and Society programme of the CCAP Livingstonia Synod in June last year.

The World Bank reports that the Malawian woman is the worst hit than men when it comes to access to financial services because the culture and economic trends sideline her from owning land, assets and other symbols banks accept to guarantee loans. So is Zimba. Once a week, Zimba meets with 24 other members of her group to deposit her meagre savings and get or pay back a soft loan. Here a loan attracts an interest rate of 20 tambala on every K100, over half of what the formal banks deduct.

The savings and interest may be small, but the gains are not. In the groups talk, they thunder past. Through the savings and soft loans, the members have started small-scale businesses and women are able to take care of their families without looking up to their husbands for commodities as small as soap, salt and tablets. Since June last year, Zimba’s has been able to get loans ranging from K10 000 and K50 000 which she uses to restock her Kaiston Shop with groceries. Apart from the profits and loans, she will receive dividends for the K200 she saves every week when the share the spoils at the end of the agreed period.

Negligible as the amounts sound to the rich, it is the stuff for dreams to Kellness Mhone. At approximately 70 years old, the granny, who is a member of the village banks, remembers as “the richest she ever got” when she had K30 000 for buying two bags of fertiliser last year.

“When I was a girl, it was almost unheard of for a woman to save money and do business. We used to rely on our husbands who usually gave us peanuts, the coins women used to knot on their chitenje [wrappers]. Banks were beyond reach even in our dreams,” explains the granny.

Breaking dependency

Of course, the banks are still unreachable…physically! To bridge the gap, even the Reserve Bank supports the spread of the VSL model along with mobile banking as a way of moving exclusion to inclusion. In an exploration of mobile banking, National Bank of Malawi marketing manager Wilkins Mijiga cited security lapses and soaring cost of establishing a brick-and-mortar branch as the reason bank are making slow inroads in rural areas.

At Endwandweni in the vastness of Mzimba, Staffel Mkandawire no longer keeps her money on chitenje. Being a VSL treasurer, she keeps it in a metal box with three keys kept by different people to eliminate the possibility of theft and abuse.

From her share in the jealously guarded safes, Kefress Tchata bought two bags of unsubsidised fertiliser.

“Unlike previously, we are able to buy bags of fertiliser worth K15 000 each when many people are whining about being left out on the list of beneficiaries of subsidised fertiliser which costs K500 a bag,” said the woman who got a K30 000 loan for the upshot.

For Loyce Jere, there is nothing more fulfilling in a woman’s life than having the financial muscle to do business and take part in running a home.

“Gone are the days we used to bother our husband for every little thing. Now we are sharing the cost of food, clothes and clothing of our children,” says the member of Chimwemwe Village Bank in Kapusa Village.

Economic independence among women, according to Luke Phiri, has reduced cases of disputes and violence in homes because men now treat the women as equals—true partners, not beggars. Men and women do not just do business together.

Awake in one boat

Group Village head Mkondanyifwa confirms that cases of domestic violence and gender-based abuse have drastically gone down because men and women respect each other.

Trained by Church and Society, village banks’ facilitator Oswald Mwale says it is also interesting that the groups sit down to agree on bylaws guiding how much they save, loan or repay. Although the rate is equal, the ceiling of what one can save per week ranges from K200 to K500.

“Not only do the agreed regulations help members repay the loans on time, but also to solve issues that emerge in the groups,” says Mwale.

Rightly, Joyce Banda of Tiuke Group in Kamsiye Village thanks Mwale and Church and Society for “putting us on the path to true independence”. The business person sells pails and exchanges some with maize which she resells for greater profit.

On the emerging shop, Chimwemwe’s Patricia Kaunda: “If the business was relying on a loan from microfinance firm, repaying the loan would go on and on until the lender knocked on her door to grab her hard-earned property.

“But VSL is our loan, we can access it when we want without travelling long distance or risking our property,” she says.

This is why Inkosi Mabulabo calls the village banks a timely boost, not just a reliable source of money in times of funerals, disease and other emergencies but also when it comes to growing one’s income and businesses.

“Apart from reducing women dependency, the village banks are playing a vital in ensuring people know each other, share business skills and discuss profitable issues during free time when idlers mess up with their lives,” says the traditional authority.

Even the only banked person in the circle agrees the formally unbanked population is moving in one boat.