Reserve Bank of Malawi (RBM) has touted the expected introduction of community banks as one way of ensuring financial inclusion, especially for the rural people.
In a written response to question on Monday, RBM spokesperson Mbane Ngwira said community banks will be established within a community and its lending and deposit activities will also be limited to that community.
He said the community banks will have no ownership links with the current nine mainstream banks.
Said Ngwira: “The policy objectives of community banks is to allow local entrepreneurs have an opportunity of establishing banking institutions within specified geographical areas [within their communities].
“We can see that this is possible because community banks will have far much lower capital requirements compared to the current minimum capital requirement of $5 million [about K3.7 billion].
He said the objective is to have banks within reach of communities to allow them have access to affordable banking services in their localities.
Ngwira said once the legal framework is in place, any eligible person will be allowed to establish community banks after meeting the licencing requirements, in terms of capital as well as all other conditions, including fit and integrity requirements for shareholders of banking institutions.
He said the community bank concept will be centrally linked to village savings and loans (VSL) popularly known as Banki Mkhonde.
Consumers Association of Malawi (Cama) executive director John Kapito has welcomed the community banks initiative, saying people have been running parallel banks in the communities.
“Community banks will go a long way to reduce the burden, anomalies and the cheating that happens in those areas.
“There is big appetite for money in the rural areas and people are willing to do anything to have money, but when you have unregulated systems, loan sharks take advantage of the vacuum and they can play around with people’s lives and incomes,” he said.
On his part, Economics Association of Malawi (Ecama) president Chikumbutso Kalilombe said he expects the establishment of community banks to be driven by the right business model.
Currently, banks are struggling to penetrate into the unbanked rural areas owing to high cost of services such as Internet connectivity and electricity, among others.
In Kenya and South Africa, for instance, community banks promote rural development through provision of banking and financial services, enhancing rural productive activities and improve economic status of small-scale producers in rural and urban areas.