Financial inclusion in rural Malawi

Recently, I had the opportunity to visit several locations in rural Malawi in southern Africa, to study different initiatives towards financial inclusion. This was part of my collaboration with a UK based organization called Rural Inclusion, and its implementation partner, CADECOM (Caritas Malawi). This activity was supported by a grant from the Frontiers Programme of the UK Royal Academy of Engineering. 

Rural Inclusion, as an organization, works with several Community Based Organizations (CBO) in multiple countries to provide training on financial literacy through their platform named Ostrii. The CBOs in turn work with several communities to impart this training as well as assess impact on the ground. 

As part of our visit, we interacted with several communities in the Dedza region, and the Ntchisi region of Malawi. Communities in these places had organized themselves to create informal banking systems called VSLA (Village Savings and Lending Association), where community members are encouraged to make deposits regularly. Unlike formal banks, VSLAs are run completely for and by the community members. Depositors in VSLAs are not customers, but members of the community, and hence stakeholders in the VSLA. Unlike a formal organization, a VSLA runs on community principles of social responsibility, openness, honesty, and caring for each other. 

VSLA deposits are then invested in multiple projects in agriculture, education and small businesses to lead to dividends. These dividends could also be in-kind, as in agriculture produce-- that are then shared with community members in proportion to their investments. 

Community members of Golomoti village in Dedza region of Malawi, with their community bank (the locked treasure box)

These community banks were run by mostly the women-folk, although there were some men as part of these initiatives as well. We also interacted with a youth club in the village of Golomoti, which started in 2019 and had members ranging in the ages of 10-40 years old. This group had a more heterogenous mix in terms of gender and age, among its members. 

A self-help youth club, started in 2019, with members ranging from 10-40 years of age, becoming financially self-sufficient from the training provided on the Ostrii platform and the guidance from the local CBO

Several institutional players are also involved in these community initiatives in different ways. Major telecom providers like Airtel and TNM are pushing mobile money initiatives, so that the community banks do not have to store cash. The community coffers currently have three locks whose keys are with three different office-bearers, requiring all their consent before the box is opened. In mobile money initiatives, apparently, the PIN is split into single digits and four different office-bearers know one digit of the PIN each. 

The ubiquitous Airtel mobile money kiosks that are found in most public areas and marketplaces, that enable subscribers to perform all their banking operations using feature phones, with the help of the kiosk attendant.

We also interacted with officials from the Malawian Reserve Bank, as well as from the UN Capital Development Fund (UNCDF), both of whom are keen on promoting digital technologies towards financial inclusion. I also noticed some marked differences in their opinions regarding digital inclusion as well. While the official from the Reserve Bank was keen on promoting digital identity solutions and bringing community banking into the formal sector, the official from UNCDF voiced concerns about such establishmentarian solutions that could upend traditional community-oriented solutions that also fostered a sense of belongingness and identity to the population. 

We could also notice several interesting elements of the community dynamics. For one, they had elaborate songs and dances celebrating the community and our visit to them. One of our hosts translated some of the lyrics of these songs to us. In one of their songs, for example, the community was welcoming us as "co-workers" that have come to enrich their community. We learned that in these communities, everyone who contributes-- including external collaborators like us-- are co-workers, and there is no strict hierarchy within the community as well. 

The women of Ntchisi welcoming us to their community bank

I also learned something interesting about the interplay between families and communities. Many tribes in this area practice a matrilinear system. Here, wealth is primarily held with the womenfolk, and a man's wealth for example, is not inherited by his sons, but by his sisters' children, because the female sibling is seen as the primary custodian of generational wealth. These traditions that have a long lineage, have been an integral part of the tribal dynamics in the region, leading to several interesting outcomes that are unique to the region. 

Some specific challenges included the challenge of getting community members to understand the need for insurance. Many community members were expecting their principal to be paid back by the insurer if they had suffered no loss, and there was no need for the sum insured to be paid out. Rural Inclusion had created several instructional videos in their local language Chichewa, to explain many fundamental concepts of financial management. These videos typically featured a central character called Mr. George, operating in different scenarios that require different kinds of financial wisdom. 

In this specific visit, the community members were shown a series of videos on different kinds of mobile money frauds and how money is lost to fraudsters when using mobile money. We encountered several responses from community members, detailing similar situations that they had been in. Thankfully, none of them had lost any money to fraudsters so far. 

Overall, the visit was a very good learning experience, showcasing a real use case of digital empowerment with the use of Internet, mobile and digital banking technologies.