World Bank cites obstacle to financial inclusion
The World Bank country manager Lauran Kullenberg has cited the ‘last mile’ connectivity problem as the major challenge under the financial inclusion agenda.
Kullenberg said commercial banks with experience in technical innovation could leverage information and communications technology (ICT) solutions help to reduce the cost of operating in rural areas and improve services provided to them.
She said the banks could do this by piloting innovations such as handheld devices with smart cards, mobile phones, mobile money, branchless banking and e-banking.
“In Kenya, for example, it is documented that over 60 percent of GDP now goes through mobile banking,” said Kullenberg last week in Blantyre at the Bankers Association of Malawi (BAM) Dinner and Dance.
Available figures show that a larger part of society remains unbanked and financially excluded, and hold neither formal nor informal financial products.
Of those financially included, 19 percent are banked, according to a Finscope Survey of 2008, while the other 20 percent use informal products or systems available to them such as katapila.
The situation is the same, or even worse, with small and medium enterprises (SMEs), as shown by the 2012 MSME Survey which found that 60 percent of MSME owners do not use any financial products or services to manage their business finances.
But Kullenberg said most of SMEs choose to keep their money at home and would rather borrow from family and friends.
“There are many reasons for this. But I think it’s useful to take a step back and have a thorough look at the barriers that prevent so much of the country from having access to basic banking and financial services- both individuals and small business owners- and ask ourselves how adequately the current set of products on offer addresses their needs,” she said.
The Bretton Woods institution is currently supporting the financial sector in Malawi with its Country Assistance Strategy (CAS) for 2013 to 2017 prioritising support on the country’s growth and economic transformation agenda.
The bank is supporting the country through the five-year $28.2 million (K9.8 billion) Financial Sector Technical Assistance Project (Fstap) to increase access to finance for the currently unbanked, but bankable population of Malawi.
Fstap has been supporting a variety of projects inclduing the setting up of the National Switch (Nat Switch by BAM).
Outside the Fstap, the World Bank Group is supporting infrastructure development such as appropriate Internet infrastructure that can facilitate banking communication.
