Malawi's Fintech Surge: Navigating Cyclone Freddy's Impact and Regulatory Hurdles
The limited regulatory response to financial technology in Malawi is impeding the diversification of the fintech sector, a crucial industry with the potential to enhance financial accessibility in rural areas and during natural disasters.
Despite fintech's capacity to facilitate broader financial inclusion, the absence of comprehensive regulations is hampering its growth and the realization of its societal benefits.
When natural disasters such as floods strike, people have difficulty to access banks yet money is needed to sort out socio-economic demands.
Financial technology, especially mobile money, has been seen as a crisis catalyst in Malawi; a useful tool as it has been attested to be fast and secure.
Evidence is seen when over half a million people were displaced following the Cyclone Freddy disaster which wreaked havoc in the southern region of Malawi in March this year, a development which made it hard for the survivors to access money.
Even though such was the case, some managed to secure their money in mobile wallets in the wake of the disaster, which destroyed property.
Henry Zongoloti from Nsanje, a survivor of the tragedy says he managed to secure K650,000 which he says was in his mobile money wallet.
"I lost about K1.2 million because it was cash that was meant for me to buy some items for my business the next day and I had saved some in my mobile wallet," he said.
"It was a big blow and a lesson at the same time, I don't know what I could have done if it wasn't for the funds I had in the mobile money wallet which I should say swiftly helped me to sort things out," he added.
The consumer demand for financial technology or fintech services in short has been increasing in Malawi with traditional banks and other financial service providers collaborating with mobile network operators to enhance transactions.
The evolution, which has seen the expansion of digital services, has seen Airtel Malawi and TNM, boosting their finance digital products, Airtel money and TNM Mpamba.
According to a National Payments Systems report by the Reserve Bank of Malawi, which focused on all transactions processed in both large value and retail payment channels, the first quarter of 2023 mobile money services, TNM Mpamba and Airtel Money processed 1.4 million transactions which translated to K10.6 billion.
The volume of financial transactions via digital banking in Malawi is at 77.5%, with 101.6 trillion Kwacha transacted annually as of December 2022.
TNM head of marketing and branding Madalitso Jonazi says the innovation has enhanced and boosted their customer base, especially with the introduction of a facility on loan and overdraft withdraws.
"We have invested a lot of resources to ensure that we keep on improving the lives as well as the experience of our customers when they are accessing this basic financial transaction on our mobile money platform," Jonazi said.
While Malawi is gradually adopting fintech solutions to enhance financial inclusion, it lags behind some South and East African nations. With the growth of mobile money and digital lending services yet few service providers to explore the market, comparison on fintech adoption in Malawi compared to other nations cannot go unnoticed.
Kenya for instance, a global model for financial inclusion has seen the transformative impact of mobile money services, notably M-Pesa, on its economy and citizens' financial well-being.
With M-Pesa as a pioneering example, the mobile money landscape in Kenya has seen the country become a global model for other African countries seeking to promote financial inclusion and digitize financial transactions.
With only two players exploring the market, TechFinance expert Inqxhuiniso Dzoole-Mwale who is also NBS Bank head of innovation and digital banking notes that investors are reluctant to invest in the fin-tech opportunity due to copy and pasting of ideas.
"You need to understand the dynamics, the culture, ethics etcetera that work in Malawi and you have to be sure that technology can be accepted," he said.
"You just can't copy and paste and expect an investor to pump in money," he added
Despite the potential for growth in the digital finance landscape, which can attract more investors, Spokesperson for the Central bank of Malawi Mark Lungu says the absence of a regulatory response is limiting their role in the space.
In a written response, Lungu told Zodiak Online that the bank has since established a regulatory response committee, which will lead to the establishment of a regulatory response plan to emerging digital financial products in the country.
With the use of mobile money rising in Malawi, South African Techprenuer and journalist, Gugu Lourie emphasizes the need for global regulatory standards in financial technological capabilities across African nations.
While pointing that regulators are a stumbling block towards adoption of the technology, Lourie said there is a need for regulators to share a global language on financial technology, so that countries on the continent are technologically advanced.
"Regulators need to move and allow innovators to do their work because when it comes to mobile money, mobile money was not waiting for regulators to tell them that there is a policy to send cash between me and you! Some of these people who are innovative are with governments so that is an opportunity for money to circulate in our countries and empower our people," said Lourie.
Increasing the usage of mobile money services in Malawi will depend on sacrifices.
For the full usage of electronic payment products and services including mobile money to be fully adopted, resources need to be pooled towards raising awareness on the benefits of embracing the technology for payment of goods and services and other third-party payments.
In so doing, access points in remote areas will increase thereby boosting the activity rates for mobile money users.
As Malawi grapples with the aftermath of natural disasters and strive for economic development, a swift response in imperative to unlock the full potential of fintech and propel the nation towards a digitally empowered future.