Mobile money and the limitations of cash in Malawi

By Kirsty Gray

The first thing I noticed when I arrived in Lilongwe, Malawi was cash. While Zambia rebased its currency two years ago, there is still an inconvenient number of zeroes on Malawian Kwacha. The highest denomination note is worth less than $2 USD. This causes several inconveniences for ordinary Malawians, and Zoona agents, in particular.

The problem with cash

In my experience traveling in Malawi, there seemed to be a much stronger dependence on hard cash — far fewer places I visited accepted card payments than in Zambia. This made life difficult for three reasons:

  • Security: At all times, my bag was full of cash. There’s no subtlety when you get to the check-out — even when paying for a few items in a store, I had to grab fistfuls of notes from my bag and count them out for all to see. I’m glad I didn’t have to do any big transactions like pay for rent or buy a car – you can imagine the inconvenience and security risk of obtaining that many notes and getting them from A to B.
  • Inaccuracy: When you have to count out that much cash, how can you be sure you got the right amount? Often, my change was handed to me in wads, wrapped with another note. While I can quickly flick through and check it is as much as I was expecting, I’m sure I lost a few bills over time. Imagine being a Malawi business-owner — this could really add up over time.
  • Inefficiency: I was only in Malawi for a couple of weeks, but I lost several hours roaming around town in search of an ATM or taking 20-minute detours in the car. There was also the novelty of how long a transaction takes – it feels strange withdrawing $20 from a cash machine and having to wait 3 minutes listening to the machine crunching and emitting between 45 and 80 bills.

Money is politics

Those more well-versed in Malawian politics will know that these three factors combined in 2013’s ‘Cashgate’. Several politicians were embroiled in a scandal of misused funds, including stealing wads of cash and hiding them in their homes. Malawi has been suffering from canceled and restricted aid payments ever since.

A problem made worse for Zoona agents

For me — a visitor to Malawi — having a lot of cash was a frustration, but also a novelty. However, observing the differences between Zambian agents and Malawian agents brought home for me how this situation was much more serious for them:

  • Security: The first few times I met Malawian agents, I was shocked to see how visible their piles of cash were to passers-by. Fortunately, there had not been any serious crimes although some agents spoke of attempted thefts on their way home after a busy day.
  • Inaccuracy: One of my roles at Zoona was to help agents improve their ‘reconciliation’ (account balancing) technique. With larger volumes of cash, I noted how it was much more challenging for Malawian agents to keep on top of their cash-at-hand and ensure they didn’t encounter losses during the day.
  • Inefficiency: This was by far the biggest challenge. Zoona agents need to keep track of how much of their float is ‘electronic’ and how much is cash. In rural areas, customers tend to be mostly ‘receivers’ – the agent hands out cash and, therefore, gains electronic money (the total float always remains the same). However, if they run out of cash they have to close their outlet and spend several hours traveling by bus, queuing at the bank, and withdrawing more bills. This is valuable time lost and also can deter potential customers if they get the impression the outlet is ‘always’ closed.

How Zoona is addressing the challenge

Fortunately, Zoona has found a way to mitigate some of these problems by establishing an altered business model in Malawi compared to its Zambian one. In Malawi, you’ll mostly see Zoona outlets outside “People’s” grocery store chains. These agents don’t need to visit a bank or risk carrying their cash home – they can lock their cash in the store overnight, and the People’s managers operate as ‘cash-wholesalers’ providing agents with hard cash in exchange for electronic payment into their account.

Zoona is still relatively new in the Malawian market. But if cash wholesaling proves successful and Zoona agents become known for their liquidity, it could prove crucial to Zoona’s success there. It will be interesting to observe how the mobile money industry can disrupt the Malawian economy over the coming years. Who knows – in the next five years, Malawians might no longer be carrying bags full of cash, but no paper bills at all.

Kirsty Gray deployed to Zambia, South Africa, and Malawi on behalf of Accion to work on an insights and agent reactivation project with fintech startup Zoona.

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