Cash In, Cash Out: Financial Transactions and Access to Finance in Malawi

Using a Financial Diaries methodology, Microfinance Opportunities undertook a project to explore the extent to which Opportunity International Bank of Malawi (OIBM) added value through the introduction of a mobile “bank-on-wheels” serving rural locations in Central Malawi. We collected transactions data (all inflows and outflows, including use of financial services) for just under 200 low-income households, half of whom were OIBM clients using the mobile bank, for 18 months over 2008-09. The sample was mostly a mix of poor farmers and microentrepreneurs (median per capita daily income: $2 purchasing power parity [PPP]).

The study found that banks and individual cash transfers dominated the financial service market—banks captured the “big money,” while individual cash transfers helped mediate day-to-day needs. Use of the OIBM van dropped off over time, though several factors unrelated to the bank may have been at work. Multiple lines of transactional evidence suggest that OIBM and its van succeeded in adding value for its women clients.

On the topic of risk management, cash flow was unsteady—business owners commonly faced weeks of zero income, for example—and banks including OIBM played a smoothing role, though it was small compared to informal mechanisms. Also, households commonly needed to pay lump-sum expenses that exceed the sample’s median weekly income for an entire household ($55). Again, the banks played a role in supporting clients through these circumstances, but only in a small minority of cases.

The behavioral insights from this study will help inform improvements in microfinance operations, and we will continue to develop the Diaries as a practitioner’s tool.