The Role of Commercial Banks on Financial Inclusion in Malawi

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.

Impact of Digitalization on the Farmers in India: Evidence using Panel Data Analysis

“…Though the number of ATMs has greatly grown, microfinance has accelerated even in rural regions, indicating that banks have directly led to accessing the unserved people; low literacy, in that order, is considered by so many banks as a key obstacle to financial inclusion [47]. This study expresses that, In India, NBFC-MFIs are inefficient in terms of financial efficiency.…”

Financial Inclusion through Digital Financial Services (DFS): A Study in Uganda

“…According to Nkuna et al (2018), alternative channels, particularly agent banking, have played a great role in expanding financial inclusion and taking services of commercial banks to rural areas. Roles that banks have played in reaching the underserved population include providing financial literacy to their customer segments, setting lower requirements for accounts hence making services affordable and putting them in place as well as observing consumer protection requirements.…”

“…Roles that banks have played in reaching the underserved population include providing financial literacy to their customer segments, setting lower requirements for accounts hence making services affordable and putting them in place as well as observing consumer protection requirements. Findings of Nkuna et al (2018) state that most banks still perceive fees and charges, distance to bank outlets, Know Your Customer (KYC) requirements, and low literacy levels as being major barriers to uptake and usage of banking services and consequently enhancing financial inclusion through banks. Fees and charges, as well as Know Your Customer (KYC) are regulatory requirements with which banks must comply.…”

“…Innovations in banking (Nkuna et al 2018) and the proliferation of mobile money (GSMA 2016) have given rise to opportunities for growing Digital Financial Services (DFSs) and financial inclusion through alternative channels. Commercial banks represent the trusted, traditional avenue of integrating the unbanked into the formal financial system in most emerging economies.…”

“…According to Iqbal and Sami (2017), financial inclusion is instrumental to reduce poverty by enhancing societal economic progress. According to Nkuna et al (2018), financial inclusion also enables reduction in income inequality and narrows the gap between the rich and poor. Evidence from theory consistently demonstrates that financial systems and services are important to households and that they drive economic growth and empirical studies based on micro and macro-economic data show that economic growth follows financial systems development (El-Zoghbi 2019).…”