Reaching Rural Areas is the Key to Unlocking Full Financial Inclusion in Malawi

Felipe Martin, Joy Kim|Oct, 2016

As Global Findex reports, only 18% of adults in Malawi have access to a bank account and just 6% have access to formal lending. According to data from the United Nations, 84 percent of the population in Malawi lives in rural areas, which, along with its ethnic and linguistic diversity, presents unique challenges for increasing financial inclusion.


Although the land-locked nation has an agricultural-based economy, financial access points in Malawi are heavily concentrated in urban areas. As we found in our newest interactive dashboard for Malawi, over 46 percent of all financial access points are located in Blantyre and Lilongwe. Even when we look across different types of institutions – commercial banks, SACCOs, microfinance institutions (MFIs), and mobile money – these two districts greatly outperform the other districts of Malawi in terms of access to financial services and products.


While the latest FinScope Survey found that financial inclusion increased from 2008 to 2014, this progress was driven largely by improvements in the three largest cities. Over half of the adult population living in rural areas is excluded from any form of formal financial services. Additionally, according to the survey, around 16 percent of people living in rural areas use informal mechanisms to manage their finances, a stark difference compared to the 6% of those people living urban and peri-urban areas.


Yet, our analysis also finds that there are a number of rural districts where demand outstrips supply. This gap in service provision highlights potential opportunities for financial service providers (FSPs) to expand their operations and take advantage of the stable demand in rural regions. As farming remains the primary source of household income in the country, FSPs could target rural areas by offering appropriate financial products aimed at the needs of adults working in the agricultural industry.


Microfinance institutions (MFIs) may benefit through rural expansion as the urban areas where they operate continue to become more competitive due to the growth of mobile money. Mobile money access points are poised to continue growing due to rapid customer uptake and relatively low operating costs. In fact, Malawi’s progress in financial inclusion has been led by the expansion and adoption of mobile money services.


In some countries, mobile money services are limited in scope and may not necessarily provide the products most appropriate for rural populations. But in Malawi, mobile money providers like Airtel Money have introduced services that provide phone-based agricultural information, and also offer collateral-free loan products that are accessible from nearly anywhere. These type of innovative product and service offerings have the potential to accelerate financial inclusion in rural areas of Malawi.


MFIs can also consider expansion to underserved areas and target the niche markets that are dependent on agriculture. Currently, nearly half of all MFI locations are found within the three largest cities of Malawi. Further, most MFIs have only between one and five access points, meaning these institutions have a very limited reach. In fact, there are almost 3.5 million Malawians who live in districts with less than 0.2 MFI access points per 10,000 inhabitants. Therefore, expansion strategies should consider the 84 percent of Malawians who live and work in rural areas. These rural MFIs could develop and offer products aimed at smallholder farmers and their families, taking into account the unique needs of these households.


MFIs and mobile money providers could also create partnerships to expand their reach by offering products and services aimed at smallholder farmers and their families, taking into account the unique needs of these households. If Malawi is to continue its march toward financial inclusion, this seems like a good place to start.


Explore the Malawi interactive dashboard yourself at