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In the face of rising poverty, high food prices, and limited access to formal credit, village banks have become the financial lifeline for most Malawians, a new World Bank report has revealed.
According to the 2025 Malawi Economic Monitor, village savings and loan groups–commonly known as village banks–are now the main source of borrowing for people across the country. About 80 percent of those surveyed rely on these small community-based lenders, with usage even higher among small businesses (90%), farmers (80%), and even salaried workers (70%).
In simple terms: when people need money to eat, plant, trade, or send their children to school–it’s the village bank they turn to, not the formal banking system.
The World Bank’s Rapid Feedback Monitoring System, which collected the data, paints a sobering picture. While only 15-20 percent of households reported taking out loans during the survey period, the ones who did mostly went to village banks. Formal institutions, it seems, remain the preserve of salaried workers and the corporate elite.
Even more shocking, the report shows that salaried workers are increasingly borrowing from katapila (money lenders)–despite the high interest rates–simply because they can’t get help from their banks. In fact, six percent of salaried respondents said they used money lenders, compared to four percent of farmers. Why? Because katapila trusts regular paychecks more than banks do.
For many working informal jobs–such as piecework–loan rejections are almost guaranteed, the report says. This leaves Malawi’s most vulnerable people at the mercy of informal lenders, or worse, without any access to credit at all.
The main reason people borrow? Food.
Secondary needs vary–farmers need inputs, salaried workers need school fees–but the number one reason remains survival.
Economic experts like Cosmas Chigwe and consumer rights advocate John Kapito say the trend is a clear sign that Malawi’s formal financial system has failed its people. High collateral demands, unrealistic account histories, and focus on big clients (especially government) have left everyday Malawians behind.
“Village banks may have higher interest rates, but they offer trust, simplicity, and access. That’s why people prefer them,” said Chigwe.
Kapito agrees, saying commercial banks have no incentive to reach out to the poor. “They’re making their money from government. That’s why they’ve ignored the people. But village banks have filled the gap.”
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As pressure grows on formal institutions to reform, the Reserve Bank of Malawi (RBM) is turning to solutions like credit reporting systems and movable asset-based lending–allowing people to borrow using items like equipment, vehicles, or livestock as collateral.
Yet, with the government crowding out the private sector in the credit market–having borrowed K5.7 trillion from the banking system by late 2024, compared to just K1.5 trillion by private companies–the space for financial inclusion remains tight.
RBM Governor MacDonald Mafuta-Mwale has admitted that although Malawi has improved financial inclusion (people owning accounts), actual credit access is still a serious problem, with only 10 percent of Malawians able to get formal loans.
What This Means:
The World Bank’s findings are a wake-up call. Village banks are not just surviving–they are quietly holding the country together. They are Malawi’s people’s banks. In the absence of accessible formal credit, they are helping families eat, farms grow, children stay in school, and small businesses keep trading.
The call is now clear: strengthen village banks, regulate them well, and let them grow. Because when banks say no, the people say yes–to each other.
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