Demand, Supply, Policy and Regulation

Malawi DEMAND, SUPPLY, POLICY AND REGULATION Malawi Country Diagnostic Report 2015 THIS REPORT WAS PRODUCED BY THE CENTRE FOR FINANCIAL REGULATION AND INCLUSION (CENFRI) AUTHORS Mia Thom, Barry Cooper, Jeremy Gray, Catherine Denoon-Stevens, Albert van der Linden and Tyler Tappendorf In-country support & stakeholder coordination: Donna Mataya and Nelson Nsiku PARTNERING FOR A COMMON PURPOSE Making Access Possible (MAP) is a multi-country initiative to support financial inclusion through a process of evidence-based country diagnostic and stakeholder dialogue, leading to the development of national financial inclusion roadmaps that identify key drivers of financial inclusion and recommended action. Through its design, MAP seeks to strengthen and focus the domestic development dialogue on financial inclusion. The global project seeks to engage with various other international platforms and entities impacting on financial inclusion, using the evidence gathered at the country level. The MAP methodology and process has been developed jointly by UNCDF, FinMark Trust (FMT) and the Centre for Financial Regulation and Inclusion (Cenfri) to foster inclusive financial sector growth. At country level, the core MAP partners, collaborate with Government, other key stakeholders and donors to ensure an inclusive, holistic process. MAP Malawi was funded by FinMark Trust and produced by Cenfri. This document sets out the comprehensive diagnostic findings which feeds into the Roadmap developed in collaboration with the MAP Malawi steering committee. A Summary note of these findings is available which sets out the findings of this diagnostic in an abridged format. ACKNOWLEDGEMENTS The authors would like to extend their gratitude to all of those who assisted us in compiling this report. The Financial Sector Policy division within the Ministry of Finance, Economic Planning and Development ably led by Mada Mandiwa provided guidance and support throughout our research process. The other members of the MAP Steering Committee including the Ministry of Finance, Economic Planning and Development, Reserve Bank of Malawi, Ministry of Industry and Trade, FHI 360, Insurance Association, Bankers Association, DFID, MUSCCO, MAMN, SMEDI, UNCDF also provided valuable feedback and input on our findings. The UNCDF Malawi programme manager, Fletcher Chilumpha has supplied indispensable insights and assistance throughout the MAP process. The FinMark Trust country coordinator, Imani Development, provided critical assistance: organising countless meetings, conducting research, arranging mystery shopping exercises and providing us with insight into Malawi and its people. Finally, we would like to thank the various people we met with from government, financial services providers, industry bodies, technology providers, telecommunications operators and i donor agencies for their time, the critical insights that guided this research and their efforts to extend financial services to the excluded. ii Table of Contents List of Abbreviations and Acronyms....................................................................................... x Executive summary ............................................................................................................. xvi 1. Introduction .................................................................................................................. 1 1.1. What is MAP? ........................................................................................................ 1 1.2. Rationale for MAP in Malawi .................................................................................. 3 1.3. Methodology and process ...................................................................................... 4 1.4. Guide to reading this document ............................................................................. 5 2. Context drivers of market development ........................................................................ 7 2.1. Macroeconomic context ........................................................................................ 7 2.2. Socio-economic and demographic context ........................................................... 17 2.3. Infrastructure context .......................................................................................... 21 2.4. Political context ................................................................................................... 22 3. Regulatory and policy framework ................................................................................ 24 3.1. Policy environment .............................................................................................. 25 3.1.1. Financial sector policies ................................................................................ 26 3.2. Regulatory framework ......................................................................................... 27 3.3. Supervisory landscape ......................................................................................... 29 3.4. Regulatory issues for financial inclusion ............................................................... 29 4. Target Market ............................................................................................................. 35 4.1. Target market context ......................................................................................... 36 4.1.1. Societal context ............................................................................................ 36 4.1.2. Budget realities ............................................................................................ 38 4.1.3. Financial literacy .......................................................................................... 40 4.2. Take-up of financial services ................................................................................ 41 4.2.1. Breadth of usage .......................................................................................... 44 4.2.2. Depth of usage ............................................................................................. 48 4.3. Segmenting the target market ............................................................................. 50 4.3.1. Introducing the segments ............................................................................. 50 4.3.2. Usage by segment ........................................................................................ 54 4.3.3. Target market profiles .................................................................................. 56 4.4. Conclusion ........................................................................................................... 73 5. Provision of financial services ...................................................................................... 75 5.1. Provider overview ................................................................................................ 75 5.2. Financial service infrastructure ............................................................................ 78 5.2.1. Capital markets ............................................................................................ 78 5.2.2. Distribution channels ................................................................................... 80 6. Product markets ........................................................................................................ 101 6.1. Market for credit ............................................................................................... 101 6.1.1. Current usage ............................................................................................. 101 6.1.2. Use cases ................................................................................................... 108 6.1.3. Providers .................................................................................................... 110 6.1.4. Products ..................................................................................................... 131 iii 6.1.5. Barriers ...................................................................................................... 142 6.1.6. Regulatory issues to consider ..................................................................... 143 6.1.7. Gaps & opportunities ................................................................................. 144 6.2. Market for payments ......................................................................................... 147 6.2.1. Current usage ............................................................................................. 148 6.2.2. Use cases ................................................................................................... 162 6.2.3. Providers .................................................................................................... 164 6.2.4. Products ..................................................................................................... 179 6.2.5. Barriers ...................................................................................................... 191 6.2.6. Regulatory issues to consider ..................................................................... 194 6.2.7. Gaps & opportunities ................................................................................. 196 6.3. Market for savings ............................................................................................. 200 6.3.1. Current usage ............................................................................................

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