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Local financial institutions essential in unlocking financial constraints to rural communities

Written by  Nellie Kapatuka
Talandira Village Bank Members sharing and borrowing savings - Pic by Nellie Kapatuka Talandira Village Bank Members sharing and borrowing savings - Pic by Nellie Kapatuka

Mulanje, November 28, 2019: Community based financial institutions are the only key to realizing financial freedom for local communities.

According to the 2014 Baseline Financial Literacy and Consumer Protection Household Survey by the Reserve Bank of Malawi (RBM), community groups score highly in rendering financial services as they are regarded easy, quick and also have information that is easily understood apart from having reasonable charges.

In this regard, in a quest to deepen people’s understanding and increasing their access to financial services, Comsip Cooperative Union Limited has embarked on a three year project aimed at addressing capacity gaps of Community Based Financial Organizations (CBFO’s).

This comes against the background that only a few proportion of the country’s population has access to formal financial services and significantly relies on the informal financial sector.

The Deepening of Financial Inclusion through Community Based Financial Organizations (DFI-CBFO) project therefore seeks to build the capacity of the CBFO’s in savings and also income generating activities through which they can reduce poverty and improve their livelihoods, becoming resilient in the process through the improved livelihood opportunities they will get in the project.

According to the DFI-CBFO Project Manager Ernest Jumbe, they want by the end of the project duration, to have strengthened CBFO’s with the capacity to design own products and services responding to their members constraints and needs and also unlocking financial barriers of the rural communities.

Jumbe said the community based organizations will in the process be linked to big financial institutions and also markets for their products to be able to sustain their operations after the project.

“The DFI-CBFO is a three year project aimed at empowering the community based organizations to be self-resilient considering that at the moment a lot of CBFOs are facing a lot of challenges such as limited ability to pool large savings as a result of the low economic activities by members”.

“We would therefore like to go beyond making sure they are financially well kept but also give them the right capacity in business management so that they are able to sustain their community organization”, explained Jumbe.

Through the project, 3000 new community based financial organizations will be established in three targeted Traditional Authorities of the selected districts, with 75, 000 new membership where 20% and 45% will be youths and women respectively.

Ethel Goodwell of Talandila CBFO in Golden Village, TA Chikumbu in Mulanje, has since started seeing the fruits of belonging to a community based financial organizations.

She says since she joined, financial constraints have lessened in her household as she is able to acquire small loans from the group through which she is able to sort out small financial issues that do arise in her household from time to time.

The group, which started in September this year and has a membership of 27 people, currently has total group savings amounting to about MK658, 000.

The DFI-CBFO project taking place in Mulanje, Karonga, Ntcheu, Zomba, Nsanje, Phalombe, Neno and Mwanza districts, is being supported by the Financial Access to Rural Markets and Smallholder Enterprises (FARMSE) with funding from the International Fund for Agriculture Development (IFAD), the Malawi Government and the private sector at a tune of US$57, 700, 000.

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