There has been so much talk recently about the importance of financial inclusion, including at the G8. The Institute of Bankers in Malawi for two successive years has held their annual conference under a theme around that. THOMSON MPINGANJIRA, the Group Chief Executive Officer for FDH Financial Holdings, recently made a presentation at the Institution’s conference and News Analyst FRANK NAMANGALE caught up with him.
What is financial inclusion in simple terms?
Financial inclusion is the process of ensuring timely and adequate access to financial services to the vulnerable groups at an affordable cost. The services are designed to enable the targeted group to have access to financial facilities that include remittances/payments, savings, borrowing, investment and insurance.
What is the scope of the financial inclusion challenge globally?
Globally, there are two billion unbanked adults and 350 million of the financially excluded adults are in Sub-Saharan Africa, putting the region as second with the most unbanked people after Asia. In Malawi, financial inclusion is lower compared to the Sub-Saharan Africa figures. In total, only 18.1 percent of adults have a financial account [34 percent for Sub-Saharan Africa].
Why is financial inclusion important at national and global level?
Financial inclusion is a key enabler to reducing poverty and boosting prosperity. Of the 17 United Nations Sustainable Development Goals [SDG], seven are directly linked to financial inclusion. This link is also true for the Africa Union’s Agenda 2063 aspirations and goals and the Malawi Growth and Development Strategy III. For instance, considering that poor women account for 1.1 billion of unbanked adults, or most of the financially excluded, increasing account ownership also would promote gender equality as research in most parts of the world has shown.
What are the main initiatives being done at global level to address financial inclusion challenges?
In response to the call for financial inclusion, the World Bank Group [WBG] with private and public partners set an ambitious target to achieve Universal Financial Access [UFA] by 2020. The UFA 2020 utilises a framework that is anchored by the four basic pillars of financial literacy, branch accessibility, product availability and risk management standing on base of collaborative partnerships of stakeholders such as government, the regulator, banks and other players.
What are the main barriers to financial inclusion at national level?
Well, there are several factors that contribute to the exclusion of certain groups from financial inclusion. The national strategy for financial inclusion includes the following as key factors: affordability of services, proximity of facilities compounded by limited distribution footprint and eligibility to access services.
As one of the top commercial banks in the country, what role are you playing to promote this agenda?
As a home-grown bank, we understand the terrain better and take deliberate action to drive financial inclusion by leveraging brick and mortar and digital technology. FDH Bank boasts of the largest branch network in Malawi of 52 service centres serving over 350 000 customers. Some remote service centres do not necessarily make money but purely provide a service to Malawians. We also have one of the most reliable and well spread out ATM network of 92 ATMs across the country. We also operate a network of over 500 Banki Pakhomo Agents [agency banking] in rural and hard to reach areas.
In 2018, we introduced a revolutionary product—Ufulu Digital Account that allows people to open an account in the comfort of their homes or offices using the mobile phone without any paperwork and operates like any other transactional bank account. We have over 200 000 Ufulu Digital Account customers, separate from the 350 000 customers in our branches. We have also integrated with mobile network operators [MNOs] Airtel and TNM to reach over five million people in the country, offering transactional services between the bank’s accounts and wallets.
Over the years we have been sponsoring the National Secondary Schools Top of the Class Quiz Competition and we introduced a special category of financial literacy, a prerequisite to financial inclusion, reaching over 30 000 students directly and millions indirectly through radio and television.
What would you recommend to the relevant stakeholders in financial inclusion in the country to expedite the process of financial inclusion?
It is important to note that the Malawi Government has taken a lead to expedite the attainment of financial inclusion in the country through the development and implementation of the National Strategy for Financial Inclusion 2016-2020. The strategy identifies a number of stakeholders key of which are: the Malawi Government through some ministries, the regulator the Reserve Bank of Malawi [RBM], and commercial banks. Therefore, my recommendations are threefold; to government, to the regulator, the RBM and to commercial banks.
I recommend to the government to consider providing incentives for commercial banks operating in rural areas and involved in financial inclusion by levying a lower tax on imported raw materials and equipment for construction of service centres and ATMs in rural areas and by reducing corporate tax on profit, for example, instead of 30 percent corporate tax, a reduction to 27 or 28 percent.
I recommend to the regulator to consider a tiered approach to liquidity reserve requirement for banks operating in rural areas with a huge network of service centres and ATMs. RBM should consider lowering the Natswitch charges on ATMs and other transactions taking into account the rural location; and to consider a tiered approach on capital requirements for existing banks involved in financial inclusion.
For commercial banks, each bank must set for itself an indicative measurable commitment target based on its size and geographical reach. This will challenge each bank to take a bite they can chew. Commercial banks should embrace digital technology and develop low cost branchless financial products that the rural poor and unbanked can easily access. This has a huge promise as it has potential to eliminate a lot of barriers including distance, charges among others.
Commercial banks should develop rural people and women-friendly financial products that will speak directly to their unique requirements—taking into account seasonality and considering removing minimum balances and some charges.