FinScope Consumer Survey Malawi 0 Introduction Malawi Government The Government of Malawi has increasingly recognised that access to financial services can play an important role in poverty alleviation and in decreasing the vulnerability of poor people. As such, financial inclusion is acknowledged as an important part of the 01 Malawi Growth and Development Strategy and to achieve the 01 Millennium Development Goals (MDGs). However, limited access to finance has been identified as a major constraint in Malawi both for individuals as found in the 00 FinScope Consumer Survey, and for small business owners according to the FinScope MSME Survey 01. The FinScope Surveys in Malawi not only enabled the assessment of the landscape of financial access, but also provided a benchmark for repeat surveys that will enable the impact of access related policy interventions to be assessed. This brochure summarises the findings of the repeat FinScope Consumer Survey 0 and as such will address the information needs that would enable the Government of Malawi to develop and monitor evidence-based policies and regulations which will help extend the reach of financial services in Malawi. FinMark Trust developed the FinScope Survey as a research tool to assess financial access in a country and to identify the constraints that prevent financial service providers to reach the financial un-served and under-served. The FinScope Survey is a nationally representative survey of how individuals source their incomes, and how they manage their financial lives. It also provides insight into attitudes and perceptions regarding financial products and services. It must be noted that it is a consumer perception study. Respondents are not asked to provide proof of accounts held, and figures are not based on supply-side numbers provided by financial institutions or regulatory authorities. To date, FinScope Consumer Surveys have been conducted in 1 countries. Objectives The FinScope Consumer Survey has the following objectives: n To measure the levels of financial inclusion (i.e. the proportion of the population using financial products and services both formal and informal) n To describe the landscape of access (i.e. the type of products and services used by financially included individuals) n To identify the drivers of, and barriers to the usage of financial products and services n To compare survey results with the first FinScope Consumer Survey in Malawi (00) and to provide an assessment of changes and reasons thereof (including possible impacts of previous interventions to enhance access) n To stimulate evidence-based dialogue that will ultimately lead to effective public and private sector interventions that will increase and deepen financial inclusion strategies
Overview Partnering for a common purpose Methodology FinScope Malawi is designed to involve a range of stakeholders engaging in a comprehensive consultation process, thereby enriching the survey and ensuring appropriateness and buy-in. The survey was carried out under the auspices of the Ministry of Finance and fully funded by FinMark Trust. A Steering Committee chaired by the Ministry of Finance was set up which comprised representatives from FinMark Trust, Reserve Bank of Malawi, Ministry of Industry and Trade, Ministry of Economic Planning and Development, Ministry of Agriculture, Ministry of Education, Ministry of Gender, Malawi Microfinance Association, UKAid/DFID, USAID, EU, World Bank, UNDP/UNCDF, AfDB, and FHI360. Understanding the lives of Malawians Following a multi-stage sampling process and a comprehensive listing exercise (listing almost 1 000 households in 03 Enumeration Areas), a total of 300 face-to-face interviews were conducted by Millennium Consulting Group (MCG, from November 013 to March 0). The sample was drawn by MCG using the sampling framework provided by the National Statistical Office of Malawi. The weighting of the data was conducted by Dr. Ariane Neethling. The sample is representative on national, urban/rural, and regional levels. Quality control and field checks were conducted by MCG, Steering Committee members, FinMark Trust, and the Local Project Coordinator. Total adult (+) population million 1 reside in rural areas 40 are under 30 years of age (FinScope Survey, defined as not economically active) 6 have primary education or lower 4 personally earn less than MK10 000 per month (1 USD = MK40) Farming remains the most important source of income (43) and overall 0 of Malawian households are involved in farming (66 of households farm for consumption only) only receive a regular salary Urban/rural Gender 1 4 43 1 n n n 1 Urban 04 Peri-urban 1 Rural n n 43 Male Female Age Education 1 years 4 No formal education 1 1 4 years 3 Primary standard 1 30 30 years 1 Primary standard 6 31 31 3 years 36 40 years 41 0 years 1 60 years 61+ years 11 Secondary 1 Secondary 3 4 Vocational training institute University or other higher education 1 10 11
Understanding the lives of adult Malawians Access to infrastructure Number of individuals with access to piped water (inside dwelling or yard/plot). (= 000) Number of individuals with electricity (for cooking or lighting). (= 6 000) Sources of income Personal monthly income Farming 46 No income 10 Ganyu (piece-work) 4 MK1 10 000 4 Money from others 6 MK10 001 0 000 Own business 3 MK0 001 0 000 Wages or salary MK0 001 0 000 MK0 001 or more 1 Other Refused/Don t know 1 USD (average) MK40 (at the month of March 0 during the analysis period) 3
Financial inclusion Analytical framework Total adult population = years and older in Malawi (1 years and older wherever the 00 and 0 surveys are compared) Financially included = adults who have/use financial products and/or services formal and/or informal Financially excluded = do not have/use any financial products and/or services neither formal nor informal Formally served = have/use financial products and/or services provided by a formal financial institution (bank and/or non-bank). A formal financial institution is governed by a legal precedent of any kind and bound by legally recognised rules ly served = have/use financial products and/or services which are not regulated and operate without legal governance that would be recognised, e.g. Chipereganyu or Katapila Banked = have/use financial products/services provided by a bank, regulated by the Reserve Bank of Malawi Served by other formal financial institutions = have/use financial products/services provided by other regulated (non-bank) financial institutions, e.g. a loan by a microfinance institution or insurance products 4
Overview n 34 of adults (1 years and older) are formally served, including both banked and other formal (non-bank) financial products/services [= increased considerably, 6 in 00] n are banked [= increased significantly, 1 in 00] n 1 have/use other formal (non-bank) products/services [= increased, 1 in 00]; n have/use informal mechanisms to manage their finances [remained stable in 00] n 1 have/use no financial products/services to manage their finances. If they save, they keep their money at home, and if they borrow they only rely on family and friends [= decreased, in 00] 00 0 Base:1 years or older 1 Formally served 6 Formally served 34 Banked 1 Banked Other formal (non-bank) 1 Other formal (non-bank) 1 Excluded Excluded 1 What drives banking? Transactional products 63 Overlaps Savings Remittances 44 Consumers generally use a combination of financial products and services to meet their financial needs someone could have a bank account and also belong to a burial society. Credit 3 What drives the use of other formal (non-banking) products? Remittances 6 n Only 1 of adults rely exclusively on banking services n 3 use a combination of bank, other formal (non-bank) and informal mechanisms to manage their financial needs, thus indicating that their needs are not fully met by the one sector alone n 1 of the adult population only rely on informal mechanisms such as Village savings and loan groups to save or borrow money Savings Mobile money 1 Banked Other formal (non-bank) 11...0 Credit 3.4 Insurance 10 4.. What drives the use of informal products? Savings 6 Excluded 1. Credit 6 Remittances 1 Please note that in 00 adults aged 1 years and older were included in the survey, while in 0 adults aged years and older are included. However, for comparison purposes, the base of 1 years and above is used whenever the 00 and 0 surveys are compared.
Financial inclusion Access Strand In constructing this strand, the overlaps in financial products/services usage are removed, resulting in the following segments: n Financially excluded adults, i.e. they do not use any financial products/services neither formal nor informal to manage their financial lives (1) n Adults who have/use informal mechanisms only but NO formal products/services (1); n Adults who have/use formal non-bank products/services but NO commercial bank products () they might also have/use informal mechanisms n Adults who have/use commercial bank products/services () they might also have/use other formal and/or informal mechanisms Access Strand by source of income Receive wages or salary Own business Money from others Farming Ganyu (piece-work) 4 34 n Banked 6 1 1 1 1 60 n only n Excluded 40 1 Financial inclusion has increased from 4 (00) to 4 (0) Access Strand across the SADC region where FinScope is implemented 0 1 1 South Africa 013 4 00 1 1 Namibia 011 6 3 n Banked Base: 1 years or older n only n Excluded Swaziland 011 Botswana 00 44 41 6 1 13 3 33 Lesotho 011 3 3 0 1 Access Strand by location Malawi 0 1 1 Urban 4 6 31 Zimbabwe 011 4 40 Peri-urban 4 10 6 4 Zambia 00 63 Rural 1 n Banked 6 n only n Excluded Tanzania 013 Mozambique 00 1 1 44 6 n Banked n only n Excluded Access Strand by gender Male Female 3 31 n Banked 13 n only n Excluded 4 4 Key findings Comparing the Access Strand by location, gender, and sources of income reveals that levels of financial inclusion (including product uptake of both formal and informal products/services) are higher: n Among adults residing in urban areas (6) compared to adults residing in peri-urban () and rural areas (44) n Among males (1) compared to females (46) n Among adults receiving a wage/salary (3), compared to adults with other main income sources which are more irregular of nature, such as farming (4) and ganyu (40) 6
Banking Banking status n The banked population has increased since 00 from 1 (about 1 13 0 million) in 00 to (about 13 million) in 0 n Banking is largely driven by transactional products/services n The level of indirect access to banking remains high in Malawi 4 of banked adults make use of bank accounts that are not registered in their names (compared to in 00) How many adults (1 years or older) are banked? 00 0 No. of banked adults in Malawi 1 13 0 (1) 13 () No. of previously banked adults in Malawi 06 (3) 46 003 (6) No. of never banked adults in Malawi 4 34 1 () 41 40 (6) No. of unbanked adults in Malawi 4 33 (1) 43 (6) Total population size 6 03 6 0 0 of adults are banked Drivers Banked people opened their bank accounts mainly to: n Receive salary/deposit money from an employer (1) n Keep money safe from theft () n Receive money from others who deposit into the bank (13) 3 of adults are not banked (Neither direct nor indirect) Barriers Main barriers to banking relate to monetary reasons (affordability): n Insufficient income to justify it (6) n Income coming in, but insufficient balance after expenses (4) Base: 1 years or older Banking figures improved, mainly due to an increased uptake of the following products: n Savings account with ATM: 640 000 to 4 000 n Receive income into bank account: 3 000 to 4 000 n The Makwacha card PIN protected online debit card allowed 303 000 cardholders to buy goods at the merchants stores Banked population have done the following activities with their bank accounts in the past 1 months prior to the survey: n Withdrawn cash from bank account (4) n Deposited cash into bank account (3) n Received transfers from someone else into their bank account (1) n Requested statements (1) n Used cashpoint to pay bills (10) Only 3 reported that banks are too far away or transport is too difficult despite the fact that Malawians take on average minutes to reach the nearest bank branch (accessibility to bank branches has improved in 00 it took on average 3 minutes to reach the nearest bank branch). However, the cost to travel to the nearest bank branch could be integrated into the affordability issue.
Savings and investments Borrowing and credit Overview 00 Bank products Other formal (non-bank) Save at home 0 4 Overview 00 Bank products Other formal (non-bank) Family/friends 4 Not saving 6 Not borrowing 0 Overview 0 Bank products Other formal (non-bank) Save at home Not saving Base: 1 years or older Savings Strand In constructing this strand, the overlaps in savings product/services usage are removed: 1 n of adults in Malawi do not save [= increased, 6 in 00] n 1 keep all their savings at home, i.e. they do not have/use formal or informal savings products or mechanisms [= decreased significantly, 40 in 00] n 13 only rely on informal mechanisms such as savings groups (they might also save at home, but they do not have/use any formal savings products) [= decreased, 1 in 00] n 3 have/use other formal non-bank savings products (they might also have/use informal savings mechanisms and/or save at home, but they do not have/use savings products from a commercial bank) n 1 have/use savings products from a commercial bank (they might also have/use other formal and/or informal mechanisms, and/or save at home) [= increased, in 00] 1 3 Overview 0 Bank products 1 Other formal (non-bank) 3 Family/friends Not borrowing Base: 1 years or older Credit Strand In constructing this strand, the overlaps in credit/loan product/services usage are removed: 1 n 1 of adults in Malawi claimed that they did not borrow or took goods on credit in the past 1 months [= decreased, 0 in 00] n 10 only rely on friends and family, i.e. they do not have/use any credit products (neither formal nor informal) [= increased, in 00] n 1 rely on informal mechanisms such as VSL groups (they might also borrow from friends and family, but they do not have any formal credit products) [= increased, 6 in 00] n 3 have/use formal non-bank credit products (they might also have/use informal mechanisms, but they do not have/use credit products from a commercial bank) [=increased, in 00] n Only 1 have/use credit/loan products from a commercial bank (they might also have/use other formal and/or informal mechanisms, or borrow from friends and family) [=decreased, in 00] 1 Base: 1 years or older Base: 1 years or older 0 1 3 13 1 0 13 1 10 1 00 3 1 40 6 00 6 0 n Bank products n n Savings at home only n Not saving n Bank products n n Family/friends only n Not borrowing 43 of adults save (mainly at home/secret place) Drivers of adults do not save (6 in 00) Barriers of adults borrow (mainly from informal sources, family and friends) Drivers 1 of adults do not borrow (0 in 00) Barriers Malawians mainly save: n To cover living expenses (41) n To keep the money safe () n For farming purposes (1) n To cover medical expenses/ emergencies () Malawians do not save mainly due to monetary reasons (affordability): n No money left over after living expenses (1) n Do not have any income () Similar to the reasons for savings, Malawians mainly borrow to pay for: Malawians do not borrow because: n Living expenses (4) n They fear indebtedness (4) n Farming expenses () n They are concerned they will not be n Medical expenses (1) able to pay it back () n Starting or expanding business (1)
Insurance and risk management n of adults in Malawi do not have any kind of financial product covering risk n (= about 13 individuals) have some financial product covering defined risk n Increase in life insurance, decrease in medical insurance Remittances Incidence of remittances n 1 (1. million decreased from 1.6 million in 00) of adults in Malawi either sent or received money to or from family members, parents, and children usually on a monthly basis n 43 (6 000) of adults who sent or received money to or from people living outside of Malawi Main risks to livelihoods Illness within the household Theft Drought Rise in prices Death of income earner 13 11 1 Remittance channel n 00 n 0 3 1 Loss of employment Natural disaster Increase in household size Loss of land or acess to land Death of family member 3 3 Bank Base: 1 years or older 11 3 Other formal (non-bank) Relative/ friend Do not remit Death or illness of livestock Other 13 Most costly events Illness or medical emergency for self or family Funeral 3 3 Wedding 1 Birth of child Engagement None of the above 3 0 (1.6 million) individuals are from households that experienced 1 or more deaths in the past year prior to the survey Medical expenses are also a main reason for savings (13) and borrowing (1) of adults have insurance Drivers Product uptake is driven by: n Life insurance n Motor vehicle insurance n Medical insurance of adults do not have insurance Barriers Main barriers to the uptake of insurance relate to: n Lack of awareness/knowledge (have not heard about it, don t know where/how to obtain it) n Affordability
Landscape of Access The Landscape of Access is used to illustrate the extent to which financially included individuals have/use financial products/services (excluding those borrowing from family/friends and those who save at home/hiding in secret place). Mobile money n 0 (1.6 million) know about mobile money, but only 3 (63 0) actually use it either as registered user () or using another person s mobile account (1) n About 3 in 4 adults in Malawi () have access to cellphones 00 Base: 1 years or older Transactional 34 3 of adults use mobile money services Drivers of adults do not use mobile money services Barriers Remittances 3 Credit Malawians mainly use mobile money services to: n Purchase air time (4) n Withdraw cash (30) n To send (1) or receive (3) money Malawians do not use mobile money services mainly because: n They are not aware of mobile money (0) n About 3 of those who are aware (1.6 million) do not have enough information about mobile money Insurance 6 Savings 3 0 Base: 1 years or older Transactional 3 Remittances 36 Credit 3 Insurance 4 Savings 10
Summary n Minor changes in the population profile o Decrease in rural population from 4 to 1 o Increase in female population from to n Small improvements in education: percentage of people with formal education increased from 0 to n Small improvements in access to infrastructure: o Access to piped water increased from. to. o Access to electricity (for cooking or lighting) increased from. to. o Average time taken to reach a bank branch reduced from 3 minutes to minutes n Farming remains the most important source of income (although it decreased from 60 to 46) n Financial inclusion increased by 4 percentage points from 4 (00) to 4 (0) mainly due to the increase in the formally served n Malawians are more likely to save (43) than to borrow money (), despite low levels of income (4) earn less than MK10 000 a month (1 USD = MK40) n Malawians save and borrow for similar reasons: living expenses, farming and medical expenses n Importance of informal mechanisms, community, friends and family when dealing with finances formal financial institutions are not the preferred place to store savings or to borrow money from (BUT decrease in investing through livestock, farming equipment, and business) n Remittance: those who do not remit increased by 4 percentage points from to 1 (BUT remittances through formal channels increased) n Although 0 know about mobile money, only 3 actually use it Key reasons for financial exclusion: n Lack of income and affordability of financial products/services n Lack of awareness of financial products (especially insurance) FinScope Malawi 0 showed that there have been a number of improvements compared to 00, including the following: Category Changes (00 to 0) Drivers Barriers Banking Increased by percentage points From 1 to To keep money safe Affordability: Low/insufficient income Savings and investments Decreased by 31 percentage points From 4 to 43 (mainly those who save at home) Saving for living expenses and medical Affordability: Low/insufficient income Borrowing and credit Increased by percentage points From 0 to Borrowing for living expenses, developmental purposes (farming, business, education and medical) Fear of indebtedness/inability to pay it back Insurance and risk management Decreased slightly from 3 to Mainly life, medical and motor insurance Illness = main risk and most costly Lack of awareness/knowledge Affordability 11
FinScope footprint FinScope Consumer Surveys have been completed in 1 countries. This allows for cross-country comparison and sharing of findings which are key in assisting on-going growth and strengthening the development of financial markets. FinScope Malawi 0 contains a wealth of data based on a nationally representative sample of the adult population of Malawi. Contact For further information about FinScope Malawi 0, please contact: Mr Jabulani Khumalo jabulanik@finmark.org.za Tel: + 11 31 1 Fax + 6 1 3 www.finmark.org.za www.finscope.co.za FinMark Trust, an independent trust based in Johannesburg, South Africa, was established in 00, and is funded primarily by UKaid from the Department for International Development (DFID) through its Southern Africa office. FinMark Trust s purpose is Making financial markets work for the poor, by promoting financial inclusion and regional financial integration. This is done by promoting and supporting financial inclusion, regional financial integration, as well as institutional and organisational development, in order to increase access to financial services for the un-served and under-served. In order to achieve this, FinMark Trust commissions research to identify the systemic constraints that prevent financial markets from reaching out to these consumers and by advocating for change on the basis of research findings. Thus, FinMark Trust developed the FinScope tool, including both the FinScope MSME Survey and the FinScope Consumer Survey.