More people are borrowing money from family and friends than from financial institutions, according to a World Bank report.

The Consumers Association of Malawi (Cama) has attributed the development to strict loans conditions prevailing in financial institutions.

In its March 2022 Malawi Gender Assessment Report, the World Bank said women were more likely than men to borrow from a savings club while men are more likely than women to borrow from family and friends, yet the gender gap in borrowing from a financial institution is small.

Reads the report in part: “Of the 52 percent of people who borrowed money in the last year, 12 percent of men and 13 percent of women borrowed for health or medical expenses and six percent of men and seven percent of women borrowed to start, operate or expand a farm or business.”

Quoting data from The Global Findex Database, the World Bank said 25 percent of the people surveyed relied on family and friends, 21 percent on savings clubs while eight percent relied on financial institutions.

The bank’s findings resonate with the recent National Statistical Office Integrated Household Survey.

The survey found that about 42.1 percent of households borrow from village banks, 15.1 percent borrow from relatives, 12.7 percent from neighbours, nine percent from loan sharks (katapila) and 6.1 percent from groceries, local merchants and employers.

Elyvin Msaka, a teacher, said she prefers borrowing from her village savings and loans group to seeking loan facilities from the bank because of the soft terms and immediate disbursement of loans.

She said: “Last time I tried  to get credit from the bank, I was told to bring a recent pay slip, a letter from my office and was told to wait for 24 hours for them to process my loan.

“When the loan was deposited into my account, out of the K500 000 I wanted, they had deducted about K40 000 in processing fee and I was supposed to pay interest of about 23 percent for the next 12 month.”

Cama executive director John Kapito said it was hard for many Malawians to borrow from financial institutions due to many requirements.

“The formal financial institutions in Malawi have failed to develop financial packages for the ordinary Malawians as their customer base is big private sector where they make money,” he said.

Published Reserve Bank of Malawi figures show that on a monthly basis, the stock of private sector credit expanded by K14.2 billion to K822.0 billion in March, compared to a contraction of K10 billion recorded in November 2021.

This followed the increases in commercial and industrial loans, mortgages and individual and household loans during the period.

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