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BAM backs high street encroachment of village banks

The Bankers Association of Malawi (BAM) is backing various commercial banks’ move to get involved in the operations of village banks, arguing that it’s a boost on financial inclusion in the country.

Local commercial banks have been launching various products to woe village banks to open and deposit their savings in special accounts; a development that is attracting mixed reactions in the public domain.

Economist from the Malawi University of Business and Applied Sciences (MUBAS) Betchani Tchereni is of the view that the development of such products is an indication that the banks have heard the wakeup call on how much they are losing out on the market.

“Through village banks, people help each other to access loans without tedious logistical aspects, for example the completions of forms, and waiting for approvals, the requirement are just too much when you go to banks these days, because the requirement are too much people tend to shun banks.

While some observers fear that the banks are not encroaching on the informal financial groupings in good faith, BAM’s Chief Executive Officer, Lyness Nkungula, holds a contrary view.

Siding with the banks, Nkungula is of the view that by tapping into this new market, the banks are only fulfilling their obligations of keeping money for the public.

“I see several benefits from what the banks are doing, and I should mention here from the onset that the village banks are not being forced to open an account with the banks, have to make a choice and an arrangement with the bank,”Nkungula stressed.

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She went on to emphasize that such bank products are going to go a long way in promoting financial inclusion and narrow the unbanked population margin in the country.

Currently, only 33 % of the country’s population is banked.

“With this initiative, we may also push up the numbers, but we could also see another privilege there of formalising the village banks, so that consumers are not exploited,” added Nkungula.

The coming in of such products by various banks follows recent condemnation by the public and various market analysts that the players on High Street have been making supernormal profits at a time the country is going through COVID-19 induced economic hardships.

To add to the public concern is the fact that all the expected transactions by the village banks, will attract a certain fee, which is deemed to be the milking pump.

Tchereni further argued that Banki Mkhonde products will likely force the members of the village banks to go through what they avert from the banks.

He also added that the encroachment of the banks with their so called tedious requirements is not commended, it is only greed.

He has therefore appealed to the banking industry to first understand the business model of the village banks and work with them as partners.

So far, four players on High Street have introduced products targeting the village banks, and they include National Bank of Malawi, Standard Bank, FDH Bank and NBS Bank.

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