Cash habit puts pressure on Malawi’s currency system

Malawi’s heavy reliance on cash is becoming increasingly costly, with billions of kwacha now needed to replace damaged banknotes, raising concerns over the sustainability of the country’s cash-driven economy.

The Reserve Bank of Malawi (RBM) expects to spend about K69.8 billion on replacing worn-out and damaged banknotes, up from K50.6 billion spent in 2025, as frequent use continues to shorten the lifespan of physical money.

Economists say expanding digital payment systems could help reduce the burden by lowering the demand for cash and cutting costs linked to printing, transporting, and replacing banknotes.

Economics Association of Malawi (ECAMA) President and University of Malawi Senior Lecturer in Macroeconomics, Dr. Bertha Bangara Chikadza, said the heavy reliance on cash remains one of the major reasons behind the rapid deterioration of banknotes in circulation.

Speaking in an interview with Malawi News Agency (MANA), Chikadza explained that frequent handling of physical money during daily transactions reduces the lifespan of banknotes.

“Daily transactions in Malawi are heavily cash dependent,” she said.

“Government levies on digital money transfers also encourage continued use of cash, resulting in increased handling and faster deterioration of banknotes,” she added.

Chikadza said the expansion of digital payment platforms would help reduce the pressure placed on physical currency by limiting the frequency with which banknotes are exchanged among individuals and businesses.

Daily physical banknotes transactions reduces the lifespan

She noted that Malawi has already recorded progress in the use of digital financial services, with increased adoption of mobile money platforms and interbank transfers.

According to Chikadza, the Reserve Bank of Malawi’s 2025 First Quarter National Financial Payment Systems Report indicates a growing shift towards electronic transactions, while the use of traditional services such as ATM withdrawals and cheque payments continues to decline.

However, she observed that several challenges are slowing the transition to a more digital economy.

She identified high transaction costs, limited access to digital financial services in rural communities, and unreliable internet connectivity as some of the major barriers preventing wider adoption of electronic payments.

Chikadza called on government and the central bank to continue investing in digital payment infrastructure, financial literacy programmes, and affordable electronic payment solutions.

She also emphasized the need for continued public awareness campaigns aimed at promoting proper handling of banknotes to preserve their quality and extend their lifespan.

The economist further encouraged businesses to adopt better cash management practices and urged members of the public to take greater care of banknotes by avoiding practices that contribute to their damage.

She said improved handling of currency, combined with increased use of digital payments, would help reduce the financial burden associated with replacing damaged banknotes.

During a media capacity-building workshop in Salima, RBM officials highlighted several practices contributing to the deterioration of Malawi’s currency.

The officials cited writing on banknotes, stapling, excessive folding, exposure to moisture and dirt, and damage during social gatherings as some of the behaviours accelerating the destruction of currency.

The central bank said reducing these practices would help lower the cost of replacing banknotes and ensure that money in circulation remains clean, durable, and suitable for public use.