New hope for the unbanked
The World Bank, in collaboration with the Reserve Bank of Malawi (RBM), will on Wednesday officially launch the Financial Sector Technical Assistance Project (FSTAP) in Lilongwe.
FSTAP aims to help increase access to finance for about 3.5 million Malawian adults who are currently unbanked, but bankable.
The launch of the five-year project follows the approval of $28.2 million funds (about K5 billion) by the World Bank Group in Washington, DC in March 2011 towards implementing the project.
Major components of the project, which will expire in August 2016, include strengthening the capacity of the Ministry of Finance and Development Planning and the RBM to improve legislation, regulation and supervision frameworks for banking, capital markets, microfinance and pensions.
According to the World Bank, although Malawi has made significant progress in strengthening financial sector regulation and supervision, the formal financial sector is still small, concentrated and serves only 26 percent of the adult population.
World Bank country representative for Malawi Sandra Bloemenkamp said in an e-mail response that the project does not target any specific group of financial institutions, but smaller banks, including microfinance institutions.
She said the project design takes into account the ongoing activities of other development partners active in the financial sector such as the United States Agency for International Development (Usaid), the International Monetary Fund (IMF), the US Treasury Office of Technical Assistance (OTA), Norges Bank, Financial Sector Reform and Strengthen (First), and UK Department of International Development (DfID).
“The government’s investment in financial literacy and financial infrastructure through this project will greatly reduce Malawi’s financially excluded population. For example, the project targets to increase the percentage of adult women who are formally banked from 17 percent to 40 percent by 2016,†said Bloemenkamp.
She added that improved access to financial services by the larger population, especially in rural areas, is one of the critical benchmarks for Malawi’s economic competitiveness and prosperity.
Bloemenkamp said other components of the project will help to make financial services more affordable for the poor by improving the technical infrastructure for payment services and making the processing of payments more efficient.
She said overall, the project will help to enhance the sector’s stability and efficiency, improve consumer protection and financial literacy and increase affordability and access for the poor.
Bloemenkamp said one component of the project worth $5.3 million (K885 million) will help the RBM to strengthen the regulation and supervision frameworks for banking, capital markets, microfinance and pensions by financing a combination of research, diagnostic and capacity building technical assistance activities.
The project has been developed in close collaboration with DfID and Usaid who are also working with the government to develop a financial sector that allocates capital to its most productive use, provides reliable and inexpensive payments services, among others.
RBM and the Ministry of Finance and Development Planning will implement the project.
