LILONGWE, June 25, 2021. As early as 6:30 a.m., Enelesi Phiri has arrived at her shop to prepare for the day’s business. She makes sure her phone is fully charged and well loaded with money to start the day. After completing a training in accounting, Phiri is employed by Shawa Diamonds Mobile as a mobile money agent in the busy Malangalanga area of Lilongwe City. As early as 7:00 a.m., customers are already in her shop to request mobile money transactions. “Customers come here to send money to their relatives, children and businesses because it is very fast and convenient. They also come to withdraw money sent by others from elsewhere,” said Phiri.
As time rolls towards midday, Malangalanga is buzzing with activity. Several other mobile money agents have opened their shops, all are busy serving various customers. Phiri started working as a mobile money agent in November 2019 and the business has been operating well. On a good day, she is able to assist customers withdraw about $6,500 and $3,000 as deposits. Apart from these transactions, Phiri also sells airtime which is a commodity that has the highest volume.
The rise of non-bank players into the payments space
Mobile money transactions are now very common in many places in Malawi. They are easily accessible and very fast in sending and withdrawing money. The entry of these non-bank players into the payments space has changed the payments landscape.
The mobile network which is either 3G or 4G is well developed and accessible by almost 88% of the population and has made it easier for people to benefit from mobile money transactions. The number of mobile money accounts in Malawi rose from fewer than 1,000 accounts to 1.8 million active accounts between 2012 and 2017. The proportion of Malawians with a mobile money account increased from 4% in 2014 to 20% in 2017. Remittances are primarily sent or received through a mobile phone. “It is very convenient for people to send and receive small amounts of money than go to the bank and stand in a queue just for this amount, which is why our transactions are so widely used,” said Phiri.
The 13th edition of the Malawi Economic Monitor (MEM) explains that the foundations of Malawi’s digital infrastructure are relatively well developed. Digital technologies have the potential to transform all aspects of the economyby lowering the cost of economic and social transactions for firms, individuals, and the public sector. “Digital investments boost economic growth, expand job opportunities, and improve service delivery,” said Hugh Riddell, World Bank Country Manager for Malawi.
While mobile money and access to the mobile network has expanded, low electricity coverage, among other things, has contributed to low access and use of broader ICT devices in Malawi. Additionally, high costs of internet smart devices, as well as lack of digital skills have also prevented Malawi from realizing the full potential of its digital infrastructure.
In Malawi, a mobile data plan of 300 MB per month (10 MB per day) costs $1.70, which is 5.4% of Gross National Product per capita per month and the cost of a 20GB plan exceeds monthly Gross National Income per capita, making it prohibitively expensive for most Malawians.
The MEM recognizes that Malawi has an opportunity to kickstart digital transformation by enabling the growth of a robust digital economy ecosystem by considering the following:
- Improving the enabling environment for the digital economy including lowering, or removing, distortionary sector-specific taxation for ICT services. Regulatory fees should be tied purely to cost recovery of fees.
- Driving digital transformation and demand through a coordinated public-private innovation venture fund that can mobilize private investment for new digital startups and provide equity capital for established digital firms.
- Strengthening competencies for digital skills and entrepreneurship through investments in infrastructure, and stronger linkages between the government, academia, and private sector.
Additional Barriers to Economic Growth
Malawi’s economic growth is projected to increase to 2.8% in 2021 and maize harvests will have a one-time jump due to Affordable Inputs Programme (AIP) and favorable weather. However, looking toward 2022 and beyond, continued universal fertilizer subsidies are unlikely to lead to another boost of maize production, and they will not help diversify growth. In fact, over the long term, AIP will deplete fiscal space and divert resources from badly needed investments.
Therefore, Malawi needs to implement policies to strengthen and diversify growth while reducing domestic borrowing. It needs to improve growth to 5% and above to increase incomes and employment, as well as to reduce a growing domestic debt burden. The government should continue current efforts to contain the COVID-19 pandemic to reduce vulnerability to future waves. It should also reduce high fiscal deficits and domestic debt to create a foundation for macrostability and growth, promote diversification and growth to increase incomes and revenues, and invest in shock-responsive social protection systems that can help prepare for future crises.