Project Everest


[Problem]: SoCon Malawi - Access and Financial Inclusion - December 2018


Malawi remains one of the poorest countries in the world, with 90% of the population living on less than $2/day, and 75% living below the lowest poverty threshold of $1.25/day (Human Development Report, 2011). As a result, the majority of Malawians are alienated from formal financial services. Stemming from this alienation, our research over both July and December teams has identified the following as core issues within the Malawian financial landscape.

  • Lack of collateral
  • High-interest rates
  • Fear of indebtedness
  • Low/irregular income

The factors detailed above are not specific to a particular customer segment, and resonate across the board as common problems faced by Malawians when attempting to access finance. 


Backing Data


Financial Inclusion:

Financial inclusion is a severe limitation for the Malawian economy, as only 18% of adults have access to a bank account, with only 6% of the nation’s population having access to formal lending. Savings is also a major issue: 54% of Malawians don’t have savings, with the major cause due to lack of money after expenses (Lee, Research Summary).


Barriers to Financial Inclusion:

The main barriers to formal finance are inextricably linked to affordability. 63% of those surveyed identified that they insufficient income to justify having a bank account, with 21% indicating an insufficient balance of income after expenses. What needs to be considered in future months is whether these expenses are ‘good’ or ‘bad’ debt. Further, in the last 12 months, 68% did not borrow, with 49% of this sample identifying fear of indebtedness, and 27% of the sample expressing concern of an inability to pay it back. Therefore, risk aversion presents itself as a barrier to financial inclusion.


Pain Points


With the majority of Malawians alienated from financial services, the most common pain points identified in acquiring loans were identified as a lack of collateral, high-interest rates, and fear of indebtedness. While organisations external to the commercial banking system, such as FINCA (for-profit business) and Umunthu Microfinance (charitable organisation) have tried to provide access to finance to these communities, the December team identified that it remains difficult for individuals to obtain loans through these organisations. The July team identified that across Blantyre and Limbe markets, whilst approximately 60% of small business owners had access to a bank account, only 7% of has successfully acquired a loan from a formal institution.

These issues stated above lead to one overarching problem: many Malawians cannot gain access to capital to expand or open businesses. Without the opportunity to expand, this significantly hampers the capability to improve their financial situation and increase their income. In order to overcome these obstacles, communities in Malawi utilise an ingenious structure: village banks. A village bank is a collaborative effort by a community to distribute loans to their community, through crowdsourcing by the members. These village banks can often be the only method of accessing finance for villagers. However these organisations often cannot meet the demand among their communities, nor issue large-scale loans (for the Village Bank at NAYO, average loan size at 5-10 000 KW, with a max of 20 000).


edited on 28th January 2019, 14:01 by Ella Grier

Ella Grier 11 months ago

Status label added: Problem

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