The Reserve Bank of Malawi (RBM) on Friday officially launched the Micro Finance Institutions (MFI) Hub Company Limited in Lilongwe.
The company, whose objective is to promote financial inclusion through technology by ensuring secure transactions and improved service delivery, will officially roll out mid next year with 20 MFIs in the pilot phase.
While MFIs serve two million people in the country, few of them have adequate resources and they lack adequate management information systems to record and process information, according to RBM.
MFIs also record transactions with little volumes, and as such, incur huge transaction costs which are passed on to the clients, causing the effective interest rates in MFI’s to go up to as high as 85 percent.
Speaking at the launch, RBM Governor Dalitso Kabambe said financial institutions should be innovative to have as many Malawians as possible to be incorporated in the financial sector.
“Technology is critical in the banking sector. It reduces transaction costs in processing credit and loans; hence, they [MFIs] need to leverage technology to reduce the cost of lending,” he said.
In her remarks, board member of MFI Hub Company Limited, Lilian Moyo, said this is a welcome development in as far as financial inclusion is concerned as it will reduce the paperwork and operate as a switch centre to reduce operational costs and improve access to financial services.
The hub will improve, among other things, processing efficiency of small value transactions, microfinance core banking and mobile phone-based applications while allowing for down streaming of services such as credit referencing services and interconnection to national switch (Nat Switch).
The hub will integrate and interface with other entities such as the National Information Systems, credit bureaus, regulators and international payment networks.