The Role of Commercial Banks on Financial Inclusion in Malawi

Onelie Nkuna,Angella Faith Lapukeni,Grant Kabango,Paxon Kaude

doi:10.4236/ojbm.2018.64061

Abstract

Financial inclusion is said to be a panacea for lowering poverty and income inequality. In most developing countries, commercial banks are considered to be the traditional channel of including the unbanked into the formal financial system. This study aims to investigate the role of commercial banks in financial inclusion in Malawi. The study used both primary and secondary data in which a qualitative questionnaire was administered to all banks. Using a combination of stratified and judgement sampling methods, data were collected from 16 bank branches. The results of the study reveal that over the past years there has been dismal performance in terms of expansion of commercial banks’ branch network, though the number of ATMs has significantly increased. The study also reveals that agent banking has significantly expanded even in the rural areas suggesting that banks have significantly contributed to reaching the unserved population. The study further finds that most banks provide financial literature to their customers, set very low minimum or zero balance requirements for certain categories of accounts, have consumer protection mechanisms and are also engaged in various initiatives aimed at enhancing financial inclusion. Nonetheless, the study finds that customer fees and charges, distance to bank outlets, Know Your Customer (KYC) requirements and low literacy levels, in that order are perceived by most banks as major barriers to financial inclusion.

Highlights

Developing countries are promoting financial inclusion in their economies due to the potential benefits associated with financial inclusion
The study further finds that most banks provide financial literature to their customers, set very low minimum or zero balance requirements for certain categories of accounts, have consumer protection mechanisms and are engaged in various initiatives aimed at enhancing financial inclusion
The paper assesses the role of branch expansion, no frills services or products, Know Your Customer (KYC) requirements, mobile banking, agent banking, financial literacy and consumer protection in promoting financial inclusion in Malawi

Summary

Introduction

Developing countries are promoting financial inclusion in their economies due to the potential benefits associated with financial inclusion. [1] [2] [3] argue that financial inclusion is a panacea for lowering poverty and income inequality. From the supply side perspective, [4] defines financial inclusion as “the process of ensuring access to financial services and timely and adequate credit needed by vulnerable groups such as weaker sections and low income groups at an affordable cost”. We define the term of financial inclusion in line with [4] as the process of ensuring timely and adequate access to financial services to the vulnerable groups at an affordable cost

Objectives

Methods

Results

Conclusion