Thursday, November 13, 2014

Malawi's Cash Economy--George's Post

Malawi is mainly a cash society.  Goods and services are exchanged for cash and not credit.  Few residents have credit cards, and most stores and shops do not accept credit purchases.  So it is necessary to have cash on hand, when, for example, purchasing groceries, gas, and other consumer goods and ordering Internet service.  ATMs are readily available in the center of town and nicer shopping centers. 
Banks routinely impose, however, a limit upon the amount of cash that can be withdrawn during any one transaction.  Usually, the limit is between 40,000 and 20,000 kwacha.  At an exchange rate of 500 kwacha to the dollar, that translates into limits of $80 to $40 per withdrawal. The ATMs dispense cash primarily in 500 or 1000 kwacha denominations.  So each trip to an ATM yields a thick wad of bills. 

 This wad of bills consists of 77 bills of 1000 kwacha, 41 bills of 500 kwacha, 2 bills of 200 kwacha, 4 bills of 100 kwacha, 1 bill of 50 kwacha, and 3 bills of 20 kwacha, for a grand total of 98,410 kwacha or 196.82 dollars.  Moreover, it represents about 6 trips to an ATM.  To put this perspective, this equals about what we need in case to fill up our car with diesel when it is close to empty.  Not having rifled through so many bills before, you can imagine how long it takes Carole and me to count the money before store clerks.
I have also found it disconcerting to be carrying around such thick piles of bills for fear of theft or loss. 
 Here is a picture of the various denominations.  They vary in color but not size.  When spread out in this manner, they remind me of the piles of monopoly money we used as kids. 


 If the cost of goods were a fraction of US costs, that might not problematic, but we have found goods here to be at least as expensive as they are in the US.  We have been told that services are much cheaper, since labor costs are extremely low compared to comparable labor costs at home.   The hassles this causes have already been forcibly brought home to us. 
On Monday afternoon (November 10th), we went to “Game,” one of the nicest retail stores in Blantyre, primarily for the purpose of purchasing a surge protector/power strip.  Game is owned, at least partially by Walmart.    [Naturally we have a new affinity for Walmart, because Seth is now working for out of San Bruno, California, which is close the San Francisco airport.]  Our total bill came to 53,000 kwacha or roughly $50, not a staggering cost for the surge protector and the other handful of items Carole purchased for the apartment.   We had expected that Game, being one of the major retailers in the city, would accept a credit card, but alas not so.   After turning out all of our pockets, and slowly and painfully counting out our kwacha, 1000 or 500 at pop, we were able to come up with only 40,000 kwachas.   While Carole waited at the counter, with our purchases piled up in front of the clerk, I went to get money from one of the several ATMs in the shopping center.  Two of the ATMs were out of service, and another one of them was out of cash (though my receipt indicated a withdrawal of 40,000—coupled, fortunately, with an acknowledgment that no cash had been withdrawn—who knows how that will be reflected at our Chase debit card account).  At a fourth ATM, I was able to withdraw 800 kwacha—my mistake—thinking that I was actually requesting 80,000 kwacha.  And only after hitting up a fifth ATM did I finally come up with enough money.  The store clerk was patient, and the store was not too busy at the time, so what otherwise might have been embarrassing proved only to be an early lesson to us about the challenges of dealing with Malawi's cash economy.     

Later I asked Brother Reynolds, one of the other senior missionaries in town (who has been getting us oriented), how in the world one could do a large purchase under these circumstances.  He only laughed.  Each day, when he is out and about, he stops at one of the several ATMs, which he has found to be reliable, and tries to make a couple of withdrawals, back to back, at the maximum withdrawal levels, to build up his cash reserves. He has a safe in their home to hold the cash—something none of us would have ever think of having, or for that matter needing, at home.  [In recent years, I hardily ever carried cash on me in the States.]   Fortunately, he also has access to the Church’s local bank account, allowing him to write checks for much greater amounts to cover Church-related expenses.   Earlier on Monday afternoon, he needed to advance us close to 300,000 kwacha to cover the costs of purchasing hardware for the home Internet service, and the cost of a six-month service contract.   At the rate of 40,000 kwachas per withdrawal, we will need to make over 8 withdrawals to amass the money necessary to reimburse him for the temporary loan.  I was amazed that the Internet provider, one of the largest in Malawi, would not accept a credit card.

For reasons not yet clear to me, Brother Reynolds has not encouraged us to set up an account at one of the local banks.  Apparently, while credit cards are not generally accepted, personal checks are, subject to proof of identity and verification of funds.  With time we will get the hang of it but right now it all seems very odd.