Determinants of Access to Banking Services in Malawi

The study aims to investigate the determinants of access to banking services in Malawi, taking into account that limited coverage of banking services especially in rural areas, has been constraining sustainable economic development. To explore the determinants of access to banking services in Malawi, household-level data from the FinScope Malawi 2008 and 2014 surveys of demand for financial services was used. From both an analysis of cross-tabulation of frequency of responses and a regression analysis, the study establishes that the degree of access to banking services rises in ascending order from rural to peri-urban to urban areas, and that the degree of access to banking services rises with rising levels of income. It also found that the degree of access to banking services is high among those who receive salaries and pensions and those residents who conduct business or earn rental income, as well as those who receive transfers and remittances from other people. Conversely, the degree of access to banking services is low among those who receive low and irregular incomes, such as smallholder farmers and casual workers. It is further established that access to banking services rises with higher levels of education and that distance to the nearest bank branch is negatively correlated with access to banking services. Another outcome is that financial innovation encourages access to banking services. Furthermore, the study notes that the above factors are interrelated. From the results of the study, suggestions are offered on how to improve access to banking services in Malawi.