Convenience Reconsidered: Some Findings on Formal vs. Informal Financial Services from the Financial Diaries
This brief is based on a Microfinance Opportunities (MFO) study “Cash In, Cash Out: Financial Transactions and Access to Finance in Malawi” that examined the impact of a branchless banking innovation in Malawi. The study focused on Opportunity International Bank of Malawi’s (OIBM’s) mobile banking van, a branchless banking innovation piloted in 2007. The van functions as a high-tech bank-on-wheels, serving communities underserved by the banking sector and providing a full range of financial services.
The study was undertaken over a two-year period among hundreds of low-income households in Central Malawi. Findings include:
- Most bank transactions involved a savings account, with cash withdrawals 20 times more common than loans involving six times the funds;
- Study respondents were more likely to borrow from friends or family than from a bank, when they needed credit;
- OIBM van represented a significant innovation in geographic proximity;
- Proximity to the van stop made a distinct difference for women.
The study concludes that the van did advance the goal of introducing formal financial services to customers, albeit on a modest scale. When compared to the extreme convenience of informal alternatives, however, the van operated at a disadvantage.