Banks lose 0.7 million customers—survey

The past decade has seen banks losing over 700 000 customers with competition from mobile network operators (MNOs) on financial services, the latest FinScope survey by FinMark Trust has established.

The survey results released on Friday revealed there has been a decline of Malawian adult population that is banked, hitting 13 percent from 27 percent in 2014 and 19 percent in 2008.

“In the proportion of banked adults in 2023, the decline represents a drop of about 700 000 adults, who mostly owned savings and cheque accounts,” reads the report in part.

However, in terms of the overall financial inclusion, there was an increase from 18 percent in 2014 to 73 percent in 2023, driven by the MNOs.

Said FinMark Trust in the report: “Mobile money services are at the forefront of financial access in both urban and rural areas, and among females and males.

“About two in every three adults use mobile money, marking a significant increase in uptake from three percent in 2014 to 69 percent in 2023.”

Meanwhile, Reserve Bank Governor Wilson Banda has warned banks to wake up and become innovative as the trend in the financial inclusion is not working in their favour.

“If this trend continues, obviously the banks will lose their relevance in future so it’s a wakeup call to the banks to ensure they remain relevant,” said Banda in an interview after the launch of the report in Lilongwe.

Poverty is coming out prominent as the main factor, making people closing bank accounts as formal employment has also declined over the period, according to the survey.

Following the Covid 19 pandemic, three out of five people were affected with 39 percent suffering income drops while one percent got retrenched.

“The uptake of financial services was not widespread largely due to constrained incomes and economic activity,” reads the report, indicating that 74 percent had to skip a meal because of lack of income, an increase from 52 percent in 2014.

With 87 percent of adults not banked in 2023, 81 percent of the unbanked expressed that they did not need an account while 16 percent said they could not maintain the minimum balance, confirming the deepening poverty levels.

The report further says there is a decline in bank savings, although overall, formal savings have surged, mostly because people are saving on their mobile wallets.

“Findings reveal a rise in adults borrowing from family and friends and a decline in people borrowing from moneylenders. Bank credit has seen a slight increase in the absolute number of borrowers “ says the report.

The International Fund for Agricultural Development supported the FinScope survey and the country director, Bernadette Mukonyora, said in an interview that there is need to support financial products that help productivity of rural agriculture, citing insurance services as one of their support areas.

With insurance services penetration at four percent, there is a huge gap to be filled, according to Mukonyora.