This morning, the impassioned and inspiring Aleksandr-Alain Kalanda, CEO of Opportunity Malawi, spoke at the conference plenary session about the triumphs of launching Opportunity International Bank of Malawi (OIBM) in 2003–offering formal financial services to impoverished people in Malawi–and the ongoing challenges they still need to address in order to access more of that country. Through Aleksandr and Opportunity Malawi, we truly see the power of microfinance at work.
Highlights from Aleksandr-Alain Kalanda’s Presentation
In May 2003, Opportunity International Bank of Malawi, (Opportunity Bank), started giving financial services to the economically active poor of Malawi. As you might imagine, there were many challenges to offering savings, loans, payments systems and insurance to the under-served and unbanked of Malawi for the first time. Our research revealed a lot of reasons why poor people were not using banks, such as expensive identity documentation, cumbersome processes, high fees, products which did not make sense, branches which are very far from where people live and work and so on. Our solutions to these problems made us become an innovative and pro-poor bank.
High levels of illiteracy and lack of known forms of identification documents such as driver’s licenses and passports made us invest in fingerprint and biometric technologies. In this, our clients’ fingerprint data is stored on their Opportunity bank cards, which enables them to securely access their accounts. The success of this technology is that it enables identification without the inconvenience of carrying ID cards or remembering PINs or passwords. The Opportunity Bank card became the only identification and evidence of having an account for our clients.
After a while, we experienced a significant uptake in savings accounts. This was proof to us that, even if people have only a few dollars, given the opportunity to save money, they will–just as Daryl Collins shared with us this morning.
In listening to the needs of our clients, we learnt that the minimum deposit that they could make was as low as US $0.60 at a time and they did not like monthly bank fees. In response, we designed a savings product that has no minimum balance requirement and which allows them pay US $0.30 when they use the account, which gives them funeral benefits of US $350 if their account balance is more than US $70 for 12 months. The clients do not pay any premiums to access the insurance benefits.
Today, Opportunity Bank of Malawi is Opportunity’s biggest deposit-taking bank, with over 417,000 savings clients with around 56,000 borrowing.
In Malawi, 85% of the population lives in rural areas, with limited transportation and communications infrastructure. Building traditional “brick and mortar” banks to reach people in such wide areas is prohibitively expensive. We needed to get creative.
We asked ourselves, how could we bring sustainable financial services to the rural people in Malawi?
To achieve this, we deployed several innovative solutions:
- Low-cost outlets (the smallest is a kiosk with $3,000 in monthly operating costs)
- ATMs that are easy to use (with biometrics and screens in the vernacular)
- Point-of-sale devices that deliver full financial services at retail shops and gas stations
- Mobile banking vehicles that are equipped with “teller offices”
- Cell phone banking with full financial services
- Business linkages with firms in the agriculture sector that aims at improving yield for the poor farmer and resultant income
- Insurance products to protect the lives of the clients including their businesses
- Financial literacy programs to ensure clients understand how they use the financial services or products
These innovations have proved to be very effective ways in reaching Malawians in rural areas. But we wanted to build on the success of these efforts, and make banking really affordable for the poor and economically active people of Malawi through enhanced branchless banking services.
We would like to see every person that has a cell phone use our mobile channel to make financial transactions, such as pay a bill or transfer money. After studying the M-PESA services in Kenya and other successful agency banking models in countries like Brazil, we would like to take banking to the next level in Malawi and through agents that receive deposits and also pay out. This will not only lower our operating costs and make the bank more viable through more fee income, but it will also bring a lot of the unbanked to financial products and the eventual eradication of poverty in Malawi.
Most of our clients are not familiar with the basic products and services of formal banks. They have little or no knowledge of how loans, insurance, payment systems or savings services work. And when they do hear about them, their reaction is sometimes one of distrust.
It quickly became clear to us that we needed to implement financial education and bank orientation. Therefore we decided to develop financial services literacy programs for our clients and we deliver these through videos, drama, meetings and road shows. We have teamed up with a U.S.-based organization called Microfinance Opportunities to help implement its Consumer Education for Branchless Banking program, a joint project with The MasterCard Foundation.
This three-year-long collaboration will enable us to better educate our clients on bank cards, point-of-sale devices and mobile phone banking, and how to make the most of these services to reach their financial goals.
Through the Consumer Education for Branchless Banking program, Opportunity Bank will seek to reach 30,000 new clients and merchant agents with financial education. And we’ll do so through a variety of channels, including radio, print media, and direct training.
In the whole of sub-Saharan Africa, 75% of the poor live in remote areas. Malawi has one of the highest population densities in Africa, with the majority of farmers living on less than one hectare of land.
Opportunity International believes that to have a significant impact on poverty, we need to reach the most marginalized people where they live and work—in rural communities.
The key to making an impact in Africa’s rural regions is agriculture.
In 2004, as part of a comprehensive rural strategy, Opportunity began offering agricultural loans to the poor farmers. Opportunity bank did this through partnerships with companies that wanted specific types of crops with specific conditions. This was the rebirth of contract farming which had been abandoned by Banks because of high levels of losses. In these partnerships the companies provide extension service for the agronomy, market data and value-chain linkages and the bank provides the financial products (savings, loans, insurance and a payment systems infrastructure).
To manage the risks inherent in providing financial products in rural areas, with undeveloped markets and farming techniques, poor infrastructure, and clients who have little credit history. Opportunity International ensures a profitable and well-managed agriculture microfinance program through:
- Traditional character and cash flow-based lending techniques to select responsible borrowers
- Insurance like weather-index crop insurance, where available, to protect against drought or flood, and credit life insurance that’s included in all loans
- Savings to help manage cash flow
- Training on the principles of saving, borrowing, cash flow and good business practices
- High-quality technical assistance for clients with agriculture extension services to improve land management and yields
In 2010, Opportunity Bank served 7,700 small-scale tea and maize farmers who had a recorded turnover through the bank of over $50 million.
The success in Malawi has given Opportunity International the confidence to do the same in Ghana, Mozambique, Rwanda and Uganda.
In the next two years, we hope to have one million clients.
On behalf of Opportunity Bank and our clients, I thank you for the support you have given us, and the support which I pray you will continue to give.
A bit about Aleksandr
Aleksandr-Alain Kalanda is CEO of Opportunity Malawi and is responsible for general administration and supervision of staff, providing leadership and direction for the management team. Aleksandr led in conceptualizing and rolling out Opportunity’s mobile branch services in Malawi. As one of Opportunity Malawi’s early employees and the head of risk and standards, Aleksandr participated in writing the bank’s policies and procedures. He worked for Deloitte as senior manager for the financial services team. Aleksandr has an MBA from Oxford Brookes University (UK), and is a Chartered Certified Accountant and qualified auditor. He was a featured speaker at the 2010 Global Savings Forum hosted by the Bill & Melinda Gates Foundation.
This session was streamed live at opportunity.org/live. Visit opportunity.org/live throughout the conference to watch the sessions live.