World Bank approves $28.2 million to increase Malawian’s access to financial services
WASHINGTON, March 24, 2011 – The World Bank Board of Directors today approved a $28.2 million credit for the Financial Sector Technical Assistance Project (FSTAP) to help increase access to finance for about three and a half million Malawian adults who are currently unbanked, but bankable.
Although Malawi has made significant progress in strengthening financial sector regulation and supervision, the formal financial sector is still small, concentrated and serves only 26 percent of the adult population. Informal financial service providers serve about 19 per cent of the adult population. At present,55 percent of the adult population are financially excluded altogether.
“The government's investment in financial literacy and financial infrastructure through this project will greatly reduce Malawi's financially excluded population. For example, the project targets to increase the percentage of adult women who are formally banked from 17 per cent to 40% by 2016,” said Sandra Bloemenkamp, the World Bank’s Country Manager for Malawi. She added that improved access to financial services by the larger population, especially in the rural areas, is one of the critical benchmarks for Malawi's economic competitiveness and prosperity.
The project has five components. One component will strengthen the capacity of the Ministry of Finance and the Reserve Bank of Malawi to improve the legislation, regulation and supervision frameworks for banking, capital markets, microfinance, and pensions. Other components of the project will help to make financial services more affordable for the poor by improving the technical infrastructure for payment services and making the processing of payments more efficient. Public trust in the financial sector will be increased by strengthening the legal and regulatory framework for financial consumer protection and developing a large-scale consumer awareness and financial literacy program. Weak consumer protection and financial illiteracy are further obstacles to access to financial services.
“Overall, the project will help to enhance the sector’s stability and efficiency, improve consumer protection and financial literacy and increase affordability and access for the poor”, said Samuel Munzele Maimbo, the World Bank’s FSTAP Manager. He added that the recent global financial crisis has underscored the importance of fostering a process of sustainable financial development which encourages appropriate levels of growth and creates jobs.
The project has been developed in close collaboration with DfID and USAID who are working with the government to develop a financial sector that allocates capital to its most productive use, provides reliable and inexpensive payments services, makes available remunerative and safe deposit facilities and offers entrepreneurs access to a suitable range of sources for short- and long-term funds.
The project will be implemented by the Ministry of Finance and the Reserve Bank of Malawi. The five-year project is scheduled to close in August 2016.