Malawi’s Digital Financial Services Sector Seeks Interoperability Boost
The digital financial services (DFS) sector in Malawi is on the cusp of a major transformation as the country strives to create a fully interoperable ecosystem, driving down transaction fees and expanding service points across the nation.
Current State of Affairs
According to industry experts, the current setup, where 100% of banks are integrated into the National Switch, a platform managed by the private sector, has led to significant growth in DFS adoption. However, there is still room for improvement.
Transaction Processing Times
“The Switch currently processes mainly ATM cash withdrawals, balance inquiry, POS (pre-authorizations), wallet-to-wallet & bank-to-wallet transactions,” said an industry insider. “Going forward, we need to improve transaction processing times.”
Regulatory Support
Regulatory bodies such as the Reserve Bank of Malawi (RBM) have played a crucial role in creating a conducive environment for private sector-led growth.
Guidelines and Clarity
“The RBM has issued guidelines for e-money schemes and mobile payment systems, providing clarity on regulations,” said another expert. “This has allowed banks and non-bank financial institutions to offer DFS services.”
Challenges Hindering Growth
Despite the progress made, challenges persist. Low digital literacy, limited electricity supply, high mobile money user fees, and resistance from merchants are some of the key barriers hindering growth.
Solutions to Overcome Barriers
“To overcome these challenges, there is a need for innovative credit assessment methods, increased use of market infrastructure such as credit reference bureaus and collateral registries,” said an expert.
Opportunities for Growth
Opportunities for market growth abound. The country’s strong growth in DFS uptake and usage through digitization of civil service salaries presents a ripe opportunity for expansion. Additionally, the biometric National Registration and Identification System (NRIS) can support customer due diligence and e-KYC.
Potential Areas of Expansion
- Digitization of civil service salaries
- Biometric National Registration and Identification System (NRIS)
Recommendations for Future Growth
Industry stakeholders are calling for increased investment in digital literacy programs, education initiatives, and innovative credit assessment methods. They also advocate for improved reporting templates and processes to enhance data automation.
Recommendations
- Increased investment in digital literacy programs
- Education initiatives
- Innovative credit assessment methods
- Improved reporting templates and processes
Conclusion
In conclusion, Malawi’s DFS sector is poised for significant growth as stakeholders work together to create a fully interoperable ecosystem. With regulatory support, innovative solutions, and increased investment in digital literacy, the sector is expected to drive financial inclusion and economic growth across the country.