Note: The data are provided for informational purposes only and in some cases, the information may be incomplete, not fully accurate or out of date. For more information on how data are compiled, see "A Note About Sources." The date of the last update for each country is marked in the section "Country Indicators." We welcome updates and comments. Click here to write to us.
Malawi
Country Indicators
Information Last Updated
August 2006
Information Compiled by
Jeremiah Grossman, IRIS Center
Population (Millions)
12.9 [2005]
Population Density (per sq km)
137 [2005]
GNI per capita (US$)
160 [2005]
GNI per capita (PPP US$)
650 [2005]
Employment in Agriculture (% of total employment)
60.8 [1992]
Gross domestic saving (% of GDP)
-12 [2005]
% Population under $2/day (PPP)
76 [1998]
Depth of Financial Sector (M2/GDP)
20 [2005]
Exchange rate
1 USD : 139.8 MWK (as of July 11, 2006)
Percentage of population with access to banking services
As of 2004, fewer than 6% of micro and small enterprises (MSEs) had access to credit (Luboyeski et al. 2004).
Capitalization of banks, NBFIs, stock market
Stock Market: Domestic only: US $61.5 million (MWK 8.6 billion) (as of early 2006). Domestic and Foreign: US $ 6.8 billion (MWK 948 billion) (as of Dec. 2005) (Investment Climate, State Dep't ) (Burritt 2006).
Ownership structure of banks (and financial institutions if available)
Government owns Malawi Savings Bank (MSB), Malawi Rural Finance Corporation (MRFC), Development of Malawian Enterprises Trust (DEMAT), and a 25% stake in National Bank of Malawi (NBW). Other institutions are privately-owned or -operated. Majority-owned foreign banks control nearly 1/2 of assets of financial sector (Luboyeski et al. 2004) (Country Commercial Guide, Commerce Dep't [pdf]) (Burritt 2006).
Moneylenders (Katapila), ROSCAs, networks of family or friends (Luboyeski et al. 2004).
Wholesale Lender(s)
Malawi Rural Development Fund (MARDEF): The MARDEF was created in Jan. 2005 with initial capital of US $ 7.2 million(MWK 1 billion). This fund aims to provide poor Malawians (particularly youth and women) with start-up and working capital for micro and small enterprises, chiefly through solidarity lending at below-market interest rates (15% as of Jan. 2006). The fund is operated by the Malawi Savings Bank, which disburses the funds to qualified MFIs for onlending. Agricultural Productivity Investment Program (APIP): Jointly-funded EU / Gov't of Malawi program provides interest-free loan capital for crop-specific, targeted onlending (in the form of in-kind seed and fertilizer packages) to smallholder farmers. Malawi Union of Savings and Credit Cooperatives (MUSCCO): Cooperative apex organization providing deposit, loan, insurance, and other banking services to member Savings and Credit Cooperatives (SACCOs) (Empowering the Poor, Mutharika) (Letter of Intent, IMF [Pdf]) (Luboyeski et al. 2004).
Definitions of microfinance or microcredit
Microfinance: Savings and credit services appropriate to and accessible by poor and low-income people who are generally denied access to the formal financial system. Services should be provided on a sustainable basis following best practices (MF Policy, 2002).
NGO microfinance provider formalization or transformation issues
Opportunity International Bank of Malawi's (OIBM) success at deposit mobilization following transformation has engendered interest in transformation among other MFIs (Luboyeski et al. 2004).
Ongoing microfinance policy development status
1. In October 2002, the government introduced the Microfinance Policy and Action Plan. It sets out objectives, including: improving the legal/regulatory framework; capacity building; promotion of best practices (including charging sustainable interest rates); and improving coordination between stakeholders. However, the recent decision to subsidize interest rates for loans through the Malawi Rural Development Fund indicates a change in governmental microfinance policy (see "Wholesale Lender(s)", above). 2. In July 2006, members of the Malawi Microfinance Network (an inactive umbrella organization for MFIs) began efforts to revive the Network, and asked the government to mandate membership by all MFIs. 3. The recently-announced Malawi Growth and Development Strategy (MGDS) includes several microfinance-oriented initiatives, including: improving rural infrastructure; developing rural cooperatives; strengthening the policy environment for microfinance; offering vocational and small business training; and increasing female participation in business (MF Policy, 2002) (MF Institutions Revive Network, Nation Online) (Burritt 2006).
Safety net availability: insurance, pension, etc.
Workers' compensation; some free medical services provided at public hospitals; pensions for public-sector employees only (Social Security, SSA).
OPPORTUNITY INTERNATIONAL BANK OF MALAWI (OIBM): Borrowers: Approx. 6,000. Savers: Approx. 40,000 (as of Jan. 2006) (Kalanda 2006 ).
OVERALL SECTOR: Total Assets: US $ 414.9 million (MWK 58 billion) (as of Dec. 2005). Total Domestic Private-Sector Loans and Advances: US $ 125.2 million (MWK 17.5 billion) (as of Dec. 2005) OPPORTUNITY INTERNATIONAL BANK OF MALAWI (OIBM): Outstanding Loan Portfolio (as of Jan. 2006): US $ 1.5 million (MWK 212 million) (Annual Report 2005, RBM) (Kalanda 2006 ).
OVERALL SECTOR: US $ 308.3 million (MWK 43.1 billion) (as of Dec. 2005). OPPORTUNITY INTERNATIONAL BANK OF MALAWI (OIBM): US $ 298.3 million (MWK 41.7 million) (as of 2003) (Annual Report 2005, RBM) (Luboyeski et al. 2004).
OIBM focuses on savings and lending for microfinance (including micro, small, and medium enterprises), while most other commercial banks focus on larger clients. National Bank of Malawi and Stanbic Bank also provide services to MFIs such as acting as depository institutions for mandatory savings, loan repayments, or excess liquidity; assuming responsibility for loans sourced from small NGOs; financing crop lending; and providing MFIs with letters of credit (Luboyeski et al. 2004).
Banks licensed as merchant bank or finance institution may not offer deposits below the minimum deposit of US $ 71.5 (MWK 10,000), thereby excluding the poor (Guidelines for Bank/FI Licenses, RBM).
Non-bank Financial Institutions
Licensed Non-Bank Financial Institutions
28, including 1 merchant bank, 2 discount houses and 2 finance companies, 11 insurance brokers, and 12 insurance companies (as of 2006). Currently, none are involved in microfinance (Existing Licensed Institutions, RBM) (Burritt 2006).
Total Assets: US $ 90.8 million (MWK 12.7 billion) (as of Dec. 2005). Total Private-Sector Loans and Advances: US $ 40.8 million (MWK 5.7 billion) (as of Dec. 2005). (Annual Report 2005, RBM)
Mostly employees of organizations, including teachers, government ministries, etc. Average loan size in 2003 was US $ 0.1 (MWK 17.644) (Luboyeski et al. 2004).
Reliance on commercial banks for depositing cash and less savings mobilization due to insufficient security at cooperative branches for storing large amounts of cash; inability of public to distinguish between MUSCCO-affiliated and (often poorly-run) non-affiliated SACCOs; poor performance of many member SACCOs; insufficient regulatory oversight under the Cooperative Act; capacity building needs for affiliated SACCOs (Luboyeski et al. 2004).
Staff capacity; poor accounting systems; inadequate office security and equipment; poorly-designed financial products; insufficient scale due to membership restrictions (Luboyeski et al. 2004).
Government lending funds and special purpose institutions
Malawi Savings Bank (MSB)
1, with 33 service points, plus post office outlets (Burritt 2006).
152,000 savers, approx. 2,000 active borrowers (as of 2003) (Burritt 2006).
Outstanding Loan Portfolio (as of 2003): US $ 0.76 million (MWK 106 million), almost all of which is lent to government parastatal institutions for non-microfinance-oriented activities (Luboyeski et al. 2004).
Low-income clients account for approx. US $ 5.4 million (MWK 750 million) (as of 2003) (Burritt 2006).
Small savers (minimum deposit of US $ 2.9 (MWK 400)). Most accounts range from US $ 21.5- $ 35.8 (MWK 3,000 - 5,000) (Luboyeski et al. 2004) (Burritt 2006).
Government-controlled and subsidy-dependent; poor record-keeping and weak MIS; high portfolio at risk; overdependence on treasury bills for interest income (Luboyeski et al. 2004).
Malawi Rural Finance Corporation (MRFC)
1, with 164 service points (as of 2003) (Burritt 2006).
154,590 depositors; 134,000 loans outstanding (as of 2003) (Burritt 2006).
Outstanding Loan Portfolio (as of 2003): US $ 4.6 million (MWK 639 million) (Burritt 2006).
US $ 1.7 million (MWK 233.4 million) (as of 2003) (Burritt 2006).
Small farmers, rural microfinance and lending, and savings mobilization (but not intermediation). Average deposit per account of US $ 11.5 (MWK 1,609) (Luboyeski et al. 2004) (Burritt 2006).
Government-controlled and subsidy-dependent; high level of non-performing assets; lack of diversification (heavily dependent upon agriculture); low voluntary savings mobilization; large number of unprofitable rural branches affects profitability; outdated information technology; weak MIS (Luboyeski et al. 2004).
Micro, small, and medium enterprises in the manufacturing, trade, and services sectors (Luboyeski et al. 2004).
Government-controlled and subsidy-dependent; high default rates on microcredit lending (Luboyeski et al. 2004).
Agricultural Productivity Investment Program (APIP)
1
In 2002-2003 growing season, 54,300 loans issues through 19 different Implementing Agencies (which consisted of NGOs, cooperatives, parastatal entities, and corporations) (Luboyeski et al. 2004).
Outstanding Loan Portfolio (as of 2003): US $ 2.5 million (MWK 345.3 million) (Luboyeski et al. 2004).
In-kind vouchers for seed and fertilizer for smallholder farmers (Luboyeski et al. 2004).
Poor repayment (in 2003, 2/3 of loans were not repaid), as this program is often viewed more like government aid than a loan to be paid back (Luboyeski et al. 2004).
Non-profit institutions
Private-Sector Microfinance Companies
2 (PRIDE Malawi and FINCA Malawi). PRIDE has 12 branch offices, and FINCA has 3 regional offices, 14 branches, and several "satellite" home offices (Burritt 2006).
PRIDE and FINCA are not permitted to accept deposits, except for forced savings, which may not be intermediated (Luboyeski et al. 2004).
PRIDE Malawi: Commerce, trade, and consumer loans, mostly to urban clientele. Loan size ranges from a minimum of US $ 46.5 (MWK 6,500) for solidarity lending to a maximum of US $ 7153 (MWK 1,000,000) for "premium" loans. FINCA Malawi: Village banks, which provide individual loans of up to US $ 7153 (MWK 10,000) to members (Luboyeski et al. 2004)
General: Reliance on commercial banks for payment services leads to inefficiency and limits growth; ambiguous ownership structure limits accountability, restricts access to commercial finance and savings, and reduces incentives for performance improvements. For PRIDE Malawi: High portfolio at risk (7% as of Dec. 2003); high staff turnover (21% in 2002); high client drop-out rate (over 50% as of 2003); poor record-keeping and failure to follow standard operating procedures; high level of governmental oversight and participation in governance; not operationally self-sufficient. For FINCA Malawi: High drop-out rates; negative Return on Assets (as of 2003); (Luboyeski et al. 2004) (Burritt 2006).
Unlicensed Microfinance NGOs
Unknown, but the Council for Non-Governmental Organizations in Malawi (CONGOMA) currently lists 37 member NGOs involved in "Enterprise Development and Credit Management" (Sector Networks, CONGOMA)
Unlicensed NGOs are not permitted to accept deposits, except for forced savings, which may not be intermediated (Luboyeski et al. 2004).
Various lower income groups, depending on MFI mission.
Often, lack of staff and management capacity, proper methodology, appropriate MIS, and careful financial management lead to high default rates (Luboyeski et al. 2004).
General Approach to Regulating
Legal basis for regulating
Definition or description of institution
Regulator(s) and role of regulator(s)
Activity that determines required regulatory status
Banks
Commercial Banks
Banking Act, 1989 and Prudential Guidelines applicable under the Banking Act; Reserve Bank of Malawi Act (RBM Act)
An institution or person accepting funds from the public or borrowing from the public or other banks and using these funds at least in part for granting credit and investing (Banking Act, 1989, Para. 2)
Reserve Bank of Malawi (RBM) (with assistance from the Ministry of Finance) is responsible for licensing and supervision of all banks and licensed financial institutions (Banking Act, 1989, Para. 14).
Full banking services with highest minimum capital requirements
Non-bank Financial Institutions
Licensed Non-Bank Financial Institutions
Banking Act, 1989 and Prudential Guidelines applicable under the Banking Act; Reserve Bank of Malawi Act (RBM Act)
Institutions licensed to provide certain types of credit and accept certain types of deposits, depending upon the institution type.
Reserve Bank of Malawi (RBM) (with assistance from the Ministry of Finance) is responsible for licensing and supervision of all banks and licensed financial institutions (Banking Act, 1989, Para. 14).
Acceptance of deposits (often with high minimum requirements) and provision of credit with lower minimum capital requirements than for commercial banks.
Cooperatives/Credit Unions
Malawi Union of Savings and Credit Cooperatives (MUSCCO) & its member SACCOs
Cooperatives Societies Act 1946 and Cooperative Societies Regulations 1946
Voluntary, member-owned financial associations of people linked by community or occupational bonds that provide financial services to their members (Luboyeski et al. 2004).
Registrar of Cooperatives. In addition, to remain a member of MUSCCO, affiliated SACCOs must conform to specified performance standards, policies, procedures, and reporting requirements (Luboyeski et al. 2004).
Provision of member-based savings and lending products, plus affiliation with the apex organization MUSCCO.
Other Savings and Credit Cooperatives
Cooperatives Societies Act 1946 and Cooperative Societies Regulations 1946
Voluntary, member-owned financial associations of people linked by community or occupational bonds that provide financial services to their members (Luboyeski et al. 2004).
Provision of member-based savings and lending products.
Government lending funds and special purpose institutions
Malawi Savings Bank (MSB)
Banking Act, 1989, but the RBM has regularly granted temporary exemptions from complying with certain requirements. In practice, MSB has failed to comply with minimum capital requirements, liquidity reserve requirements, lending limits, and other prudential regulations. The RBM views MSB as a non-bank financial institution with banking privileges (Luboyeski et al. 2004).
Government-owned parastatal bank focused upon providing deposit services to lower-income Malawians (Luboyeski et al. 2004).
Government- and donor-funded parastatal trust focused upon the provision of financing, business, and technical advisory and marketing services to micro, small, and medium enterprises engaged in manufacturing, trade, and services (Luboyeski et al. 2004).
Nonprofit institutions organized as trusts that provide microfinance and other development-oriented services (Luboyeski et al. 2004).
NGO Board of Malawi (10--person Board appointed by government in consultation with the Council for Non-Governmental Organizations in Malawi (CONGOMA)) has limited regulatory role, including approval or rejection of registration applications; maintenance of a register and database of NGOs; and receipt of annual financial statements and reports from NGOs (NGO Act 2000, Sections 7, 18).
Cost: License assessment fee of US$ 1,250 (approx. MWK 174,750) must accompany license application. Time: Decision whether to grant a license must be made within 90 days (Guidelines for Bank/FI Licenses, RBM) (Banking Act, 1989, Para. 7).
Cost: License assessment fee of US$ 1,250 (approx. MWK 174,750) must accompany license application. Time: Decision whether to grant a license must be made within 90 days (Guidelines for Bank/FI Licenses, RBM) (Banking Act, 1989, Para. 7).
Cooperatives/Credit Unions
Malawi Union of Savings and Credit Cooperatives (MUSCCO) & its member SACCOs
Registrar of Cooperatives, Ministry of Industry and Commerce (Luboyeski et al. 2004).
Cooperative Association. SACCOs can be limited or unlimited liability organizations, while MUSCCO and other federations must be limited liability organizations. (Luboyeski et al. 2004) (Cooperative Societies Act, 1946, Act 4 [per WOCCU Guide ]).
Only members may be owners. Min. 10 members, all of whom must: be at least 18 years of age; live or work in the cooperative's target area; and be members of only one credit-granting society. (Cooperative Societies Act, 1946, Act 5(1), 21-23) [per WOCCU Guide ]).
Registrar of Cooperatives, Ministry of Industry and Commerce (Luboyeski et al. 2004).
Cooperative Association SACCOs can be limited or unlimited liability organizations, while federations must be limited liability organizations. (Luboyeski et al. 2004) (Cooperative Societies Act, 1946, Act 4 [per WOCCU Guide ]).
Only members may be owners. Min. 10 members, all of whom must: be at least 18 years of age; live or work in the cooperative's target area; and be members of only one credit-granting society. (Cooperative Societies Act, 1946, Act 5(1), 21-23) [per WOCCU Guide ]).
Government lending funds and special purpose institutions
No shareholders. Owners (similar to members) guarantee repayment of debts and obligations up to a certain limit per member US $ 7.2( (MWK 1,000) for PRIDE Malawi) (Luboyeski et al. 2004).
Directors and Officers: Must be approved by the RBM, which will decide within 30 days. Candidates must meet RBM's "fit and proper" requirements, including: no record of insolvency, bankruptcy, or poor debt repayment; no convictions for crimes involving dishonesty or fraud; no history of removal from office at another licensed institution or office of trust; no evidence of other poor professional conduct, including accepting bribes or permitting illegal transactions; no disqualification or suspension from practice of a profession for professional misconduct; not currently directing or working for another licensed institution, government office, or political party; not a minor or legally disabled; evidence of good professional reputation and sufficient educational qualifications and professional experience for the position in question; and others (see Part IV of the Directive for further detail). Min. two executive officers (Directive on New Directors and Officers
, Part IV) (Banking Act, 1989, Para. 6, 8, 25, 45).
Directors and Officers: Must submit: three years of financial statements; history of ownership of 10% of more of the stock in a bank or financial institution, or holding the position of Director or Officer in any bank or financial institution; and other documentation. Principal Shareholders and Institutional Controlling Shareholders (15% or more of voting stock): Detailed information required, including history of relationships with other FIs; any negative history (convictions, disciplinary action, etc.); beneficial interests in this and other FIs; and complete financial statements (three years of audited statements for institutions. All Shareholders: Name, address, nationality, number of shares and percentage to be owned. (Directive on New Directors and Officers, Annex) (Banking Act, 1989, Para. 6) (Application Guidelines, RBM).
Once a license has been granted, operating manuals will be assessed for adequacy of operating procedures during a ‘premises inspection’ (Guidelines for Bank/FI Licenses, RBM).
No explicit limits.
Non-bank Financial Institutions
Licensed Non-Bank Financial Institutions
Directors and Officers: Must be approved by the RBM, which will decide within 30 days. Candidates must meet RBM's "fit and proper" requirements, including: no record of insolvency, bankruptcy, or poor debt repayment; no convictions for crimes involving dishonesty or fraud; no history of removal from office at another licensed institution or office of trust; no evidence of other poor professional conduct, including accepting bribes or permitting illegal transactions; no disqualification or suspension from practice of a profession for professional misconduct; not currently directing or working for another licensed institution, government office, or political party; not a minor or legally disabled; evidence of good professional reputation and sufficient educational qualifications and professional experience for the position in question; and others (see Part IV of the Directive for further detail). Min. two executive officers (Directive on New Directors and Officers
, Part IV) (Banking Act, 1989, Para. 6, 8, 25, 45).
Directors and Officers: Must submit: three years of financial statements; history of ownership of 10% of more of the stock in a bank or financial institution, or holding the position of Director or Officer in any bank or financial institution; and other documentation. Principal Shareholders and Institutional Controlling Shareholders (15% or more of voting stock): Detailed information required, including history of relationships with other FIs; any negative history (convictions, disciplinary action, etc.); beneficial interests in this and other FIs; and complete financial statements (three years of audited statements for institutions. All Shareholders: Name, address, nationality, number of shares and percentage to be owned. (Directive on New Directors and Officers, Annex) (Banking Act, 1989, Para. 6) (Application Guidelines, RBM).
Once a license has been granted, operating manuals will be assessed for adequacy of operating procedures during a ‘premises inspection’ (Guidelines for Bank/FI Licenses, RBM).
Demand deposits prohibited for all institution types. Merchant banks and finance institutions may only accept time deposits of US $ 71.53 (MWK 10,000) or greater. Mortgage institutions may accept savings deposits of smaller sizes (Guidelines for Bank/FI Licenses, RBM).
Cooperatives/Credit Unions
Malawi Union of Savings and Credit Cooperatives (MUSCCO) & its member SACCOs
Ministry of Industry and Commerce's Registrar of Cooperatives sits on MUSCCO's Board. Number of Board members must be stated in bylaws (Luboyeski et al. 2004) (Cooperative Societies Rules, 1946, Rule 30 [per WOCCU Guide ]).
No restrictions (Cooperative Societies Rules, 1946, Rules 19 and 39 [per WOCCU Guide ]).
Other Savings and Credit Cooperatives
Number of Board members must be stated in bylaws (Cooperative Societies Rules, 1946, Rule 30 [per WOCCU Guide ]).
No restrictions (Cooperative Societies Rules, 1946, Rules 19 and 39 [per WOCCU Guide ]).
Government lending funds and special purpose institutions
Malawi Savings Bank (MSB)
Government-owned and -managed. 6-person Board of Directors chaired by a representative of the Ministry of Finance (Luboyeski et al. 2004).
Minimum two persons to form a company. Minimum three Directors For PRIDE Malawi, both UNCDF/UNDP and Ministry of Industry and Commerce can veto nominated Board members, dismiss Directors or members, and block changes to the organization's Memorandum and Articles of Association. FINCA's 5-member Board is run without government involvement (Luboyeski et al. 2004) (Setting up a Business, Globe Africa).
Deposits, except for forced (compulsory) savings, which may not be intermediated (Luboyeski et al. 2004).
Unlicensed Microfinance NGOs
Minimum two Malawian citizen directors or trustees to be registered as an NGO (NGO Act 2000, Section 20(2)).
Must provide: plan of intended activities and approval from the Ministry responsible for such activities; and most recent audited annual financial statements, annual report, and name/address of auditors (NGO Act 2000, Section 20) (NGO Board of Malawi Application for Registration, NGO Board).
Deposits, except for forced (compulsory) savings, which may not be intermediated (Luboyeski et al. 2004).
Minimum Tier I Capital: 4%. Minimum Total Capital: 8%. Desirable Capital Levels: 6% (Tier I) and 10% (Total). Banks that meet the minimum but not the desirable levels are subject to closer supervision for financial soundness (Directive on Minimum Capital Ratios for Banks, Part III, Section 1).
Tier I (Core) Capital: Includes paid-up shares; and disclosed reserves, including statutory reserves, retained profits from prior years, share premiums, and 60% of post-tax profits in the current year-to-date, less any unconsolidated investment in financial companies. Tier II (Supplementary) Capital: Includes revaluation reserves and general provisions approved by the RBM (Directive on Minimum Capital Ratios for Banks, Part I, Section 4).
Provisioning based on either objective or subjective criteria, whichever leads to more stringent provisioning. GENERAL: 1% of outstanding credit facilities (less specific provisions and interest in suspense). SPECIAL MENTION (potential weaknesses exist in the borrower's ability to repay and/or collateral): 10%. SUBSTANDARD (late at least 90 days but less than 180 days, OR evidence of "well-defined weaknesses" that make full recovery of all principal and interest questionable): 20%. DOUBTFUL (late at least 180 days but less than 1 year, OR weakness exist that make full collection/repayment "highly questionable and improbable"): 50%. LOSS (late at least 1 year, OR the asset is "deemed uncollectible"): 100% (Directive NO.DO1-06/ASCL on Asset Classification).
Tier I (Core) Capital: Includes paid-up shares; and disclosed reserves, including statutory reserves, retained profits from prior years, share premiums, and 60% of post-tax profits in the current year-to-date, less any unconsolidated investment in financial companies. Tier II (Supplementary) Capital: Includes revaluation reserves and general provisions approved by the RBM (Directive on Minimum Capital Ratios for FIs, Part I, Section 4).
Provisioning based on either objective or subjective criteria, whichever leads to more stringent provisioning. GENERAL: 1% of outstanding credit facilities (less specific provisions and interest in suspense). SPECIAL MENTION (potential weaknesses exist in the borrower's ability to repay and/or collateral): 10%. SUBSTANDARD (late at least 90 days but less than 180 days, OR evidence of "well-defined weaknesses" that make full recovery of all principal and interest questionable): 20%. DOUBTFUL (late at least 180 days but less than 1 year, OR weakness exist that make full collection/repayment "highly questionable and improbable"): 50%. LOSS (late at least 1 year, OR the asset is "deemed uncollectible"): 100% (Directive NO.DO1-06/ASCL on Asset Classification).
Malawi Union of Savings and Credit Cooperatives (MUSCCO) & its member SACCOs
Required: MUSCCO requires member SACCOs to invest 15% of their members' deposits in a liquidity reserve account in MUSCCO's Central Finance Facility (CFF); MUSCCO also requires SACCOs to invest 10% of their member shares in the CFF. In addition, all SACCOs must contribute 10% of gross profits annually to reserve fund. Recommended: Statutory reserve deposit should reach 10% of total assets/liabilities. Unlimited-liability cooperatives may not pay dividends if the reserve fund is below 10% (Luboyeski et al. 2004) (Cooperative Societies Rules, 1946, Rule 18 & Cooperative Societies Act, 1946, Act 33 [per WOCCU Guide]).
Other Savings and Credit Cooperatives
Required: Must contribute 10% of gross profits annually to reserve fund. Unlimited-liability cooperatives may not pay dividends if the reserve fund is below 10% of total assets/liabilities (Cooperative Societies Rules, 1946, Rule 18 & Cooperative Societies Act, 1946, Act 33 [per WOCCU Guide]).
Risk Management Guidelines
Guidelines & restrictions on financial services
Guidelines & restrictions on operational rules
Guidelines & restrictions on interest rates
Concentration of risk
Connected/insider business
Banks
Commercial Banks
Permitted: Full range of financial services. Prohibited: Loans and advances against its own shares. Prohibited without Prior RBM Approval: Engaging in wholesale or retail trade on its own account (except as necessary to satisfy debts owed to it); purchasing, acquiring, or holding immovable property (except for conducting its own business or for staff housing and amenities); engaging in fiduciary operations (Banking Act, 1989, Para. 23, 24, 41).
RBM approval required for: opening and closing branches or outlets; merger or acquisition; ownership of over 10% of the paid-up capital of another company; financial restructuring, liquidation, or sale or disposal of shares; changes affecting control or management (Banking Act, 1989, Para. 25)
Hire-Purchase Act sets interest rate ceilings for hire-purchase transactions (Luboyeski et al. 2004).
Permitted (up to 25% of the capital base per individual/group and up to 100% of the capital base in aggregate), but all transactions with related persons must be conducted on the same basis as all other transactions. "Related persons" includes: relatives of significant shareholders, Directors, or Officers; businesses run or controlled by such shareholders, Directors, or Officers; subsidiaries or parent companies; and others. Directors and Officers must disclose interests in proposed transactions and refrain from influencing decisions regarding these transactions. Such transactions must be approved unanimously and in advance by the Board of Directors, as must loans to employees that exceed two years' compensation (Directive on Related Transactions, Parts III and IV) (Banking Act, 1989, Para. 29).
Non-bank Financial Institutions
Licensed Non-Bank Financial Institutions
Permitted: Loans and time deposits (min. value approx. US$ 71.5(MWK 10,000). Mortgage institutions also permitted to accept other savings with no minimum value. Prohibited: Demand deposits; loans and advances against its own shares. Prohibited without Prior RBM Approval: Engaging in wholesale or retail trade on its own account (except as necessary to satisfy debts owed to it); purchasing, acquiring, or holding immovable property (except for conducting its own business or for staff housing and amenities); engaging in fiduciary operations (Guidelines for Bank/FI Licenses, RBM) (Banking Act, 1989, Para. 23, 24, 41).
RBM approval required for: opening and closing branches or outlets; merger or acquisition; ownership of over 10% of the paid-up capital of another company; financial restructuring, liquidation, or sale or disposal of shares; changes affecting control or management (Banking Act, 1989, Para. 25)
Hire-Purchase Act sets interest rate ceilings for hire-purchase transactions (Luboyeski et al. 2004).
Max. Exposure to an Individual or Related Group: 25% of the capital base. Exposures greater than 25% may be approved by the RBM on a case-by-case basis, but such approved exposures must be reduced to 25% of the capital base within 1 year. Max. Aggregate of Large Exposures (each 10% of the capital base or greater): 800% of the capital base. Max. Ownership of another Company: 25% of the capital base. Max. Aggregate Investment in Immovable Property: 100% of sum of capital and reserves (Directive on Large Exposures, Parts IV and V) (Banking Act, 1989
, Para. 30).
Permitted (up to 25% of the capital base per individual/group and up to 100% of the capital base in aggregate), but all transactions with related persons must be conducted on the same basis as all other transactions. "Related persons" includes: relatives of significant shareholders, Directors, or Officers; businesses run or controlled by such shareholders, Directors, or Officers; subsidiaries or parent companies; and others. Directors and Officers must disclose interests in proposed transactions and refrain from influencing decisions regarding these transactions. Such transactions must be approved unanimously and in advance by the Board of Directors, as must loans to employees that exceed two years' compensation (Directive on Related Transactions, Parts III and IV) (Banking Act, 1989, Para. 29).
Cooperatives/Credit Unions
Malawi Union of Savings and Credit Cooperatives (MUSCCO) & its member SACCOs
Permitted: Deposits; loans to members for approved purposes; loans to other SACCOs (if approved by the Registrar) (Cooperative Societies Act, 1946, Act 29 & Cooperative Societies Rules, 1946, Rule 19 [per WOCCU Guide]).
SACCO membership eligibility based upon occupation or residence of members (Cooperative Societies Rules, 1946, Rule 68(2)(a) [per WOCCU Guide]).
Bylaws specify maximum interest rates. Dividends may not be paid if interest rate exceeds 10% per annum. Hire-Purchase Act sets interest rate ceilings for hire-purchase transactions (Cooperative Societies Rules, 1946, Rules 68 & 18 [per WOCCU Guide]) (Luboyeski et al. 2004).
Max. Share Capital per Member: 1/5 of society's share capital, unless the member is a SACCO itself. Max. Credit to an Individual Member: Must be set in bylaws. Max. Aggregate Deposit and Loan Liability: Must be fixed by society's members, subject to Registrar's approval (Cooperative Societies Act, 1946, Act 26 & Cooperative Societies Rules, 1946, Rules 19 & 68(2)(b)(ii) [per WOCCU Guide]).
Members of the loan committee may not participate in decisions on their own loan applications (Cooperative Societies Rules, 1946, Rules 43(2) [per WOCCU Guide]).
Other Savings and Credit Cooperatives
Permitted: Deposits; loans to members for approved purposes; loans to other SACCOs (if approved by the Registrar) (Cooperative Societies Act, 1946, Act 29 & Cooperative Societies Rules, 1946, Rule 19 [per WOCCU Guide]).
SACCO membership eligibility based upon occupation or residence of members (Cooperative Societies Rules, 1946, Rule 68(2)(a) [per WOCCU Guide]).
Bylaws specify maximum interest rates. Dividends may not be paid if interest rate exceeds 10% per annum. Hire-Purchase Act sets interest rate ceilings for hire-purchase transactions (Cooperative Societies Rules, 1946, Rules 68 & 18 [per WOCCU Guide]) (Luboyeski et al. 2004).
Max. Share Capital per Member: 1/5 of society's share capital, unless the member is a SACCO itself. Max. Credit to an Individual Member: Must be set in bylaws. Max. Aggregate Deposit and Loan Liability: Must be fixed by society's members, subject to Registrar's approval (Cooperative Societies Act, 1946, Act 26 & Cooperative Societies Rules, 1946, Rules 19 & 68(2)(b)(ii) [per WOCCU Guide]).
Members of the loan committee may not participate in decisions on their own loan applications (Cooperative Societies Rules, 1946, Rules 43(2) [per WOCCU Guide]).
Government lending funds and special purpose institutions
Malawi Savings Bank (MSB)
Permitted: Credit; savings, time, and checking deposits. Prohibited: Loans and advances against its own shares. Prohibited without Prior RBM Approval: Engaging in wholesale or retail trade on its own account (except as necessary to satisfy debts owed to it); purchasing, acquiring, or holding immovable property (except for conducting its own business or for staff housing and amenities); engaging in fiduciary operations (Luboyeski et al. 2004) (Banking Act, 1989, Para. 23, 24, 41).
Hire-Purchase Act sets interest rate ceilings for hire-purchase transactions (Luboyeski et al. 2004).
Malawi Rural Finance Corporation (MRFC)
Permitted: Credit; deposit-taking (but not for intermediation). Prohibited: Intermediating deposits; loans and advances against its own shares. Prohibited without Prior RBM Approval: Engaging in wholesale or retail trade on its own account (except as necessary to satisfy debts owed to it); purchasing, acquiring, or holding immovable property (except for conducting its own business or for staff housing and amenities); engaging in fiduciary operations (Luboyeski et al. 2004) (Banking Act, 1989, Para. 23, 24, 41).
Hire-Purchase Act sets interest rate ceilings for hire-purchase transactions (Luboyeski et al. 2004).
Development of Malawian Enterprises Trust (DEMAT)
Hire-Purchase Act sets interest rate ceilings for hire-purchase transactions (Luboyeski et al. 2004).
Non-profit institutions
Private-Sector Microfinance Companies
Permitted: Credit. Prohibited: Mobilizing savings and intermediating deposits for on-lending. However, in practice, PRIDE Malawi has used forced savings to fund lending activities (Luboyeski et al. 2004).
Hire-Purchase Act sets interest rate ceilings for hire-purchase transactions (Luboyeski et al. 2004).
Unlicensed Microfinance NGOs
Permitted: Credit. Prohibited: Deposits, except for forced savings (Luboyeski et al. 2004).
Hire-Purchase Act sets interest rate ceilings for hire-purchase transactions (Luboyeski et al. 2004).
Reporting and Supervision
Supervision Method
Supervision costs and fees
Disclosure and reporting requirements
Depositor protection mechanisms (e.g., deposit insurance or lender of last resort)
Banks
Commercial Banks
On-site and off-site supervision, periodically or at the RBM's discretion (Banking Act, 1989, Para. 22)
Supervision costs may be recovered from the banks or financial institutions supervised, if such directives or regulations are enacted (Banking Act, 1989, Para. 53).
Reporting: Weekly: Foreign exchange risk exposures. Monthly: Foreign currency lending ratios. Quarterly: Capital adequacy data; list of "Large Exposures" (exposures of 10% of the capital base or greater to an individual or related group); list of exposures to insiders and related persons; list of non-performing assets. Annually: Audit report by independent external auditor; balance sheet and profit & loss account. Disclosure: Must submit audit report to shareholders; must publish audited financial statements in at least one newspaper of general circulation; must display audited financial statements in a conspicuous location in the institution's head office (Directive on Foreign Exchange Risk, Part III, Section 7) (Directive on Foreign Currency Lending
, Part III, Section 4) (Directive on Minimum Capital Ratios for Banks, Part III, Section 2) (Directive on Audits, Parts IV and V) (Directive on Large Exposures, Part VI) (Directive on Related Transactions, Part V) (Directive on Asset Quality for Banks, Part III) (Banking Act, 1989, Para. 19).
On-site and off-site supervision, periodically or at the RBM's discretion (Banking Act, 1989, Para. 22)
Supervision costs may be recovered from the banks or financial institutions supervised, if such directives or regulations are enacted (Banking Act, 1989, Para. 53).
Reporting: Quarterly: Capital adequacy data; list of "Large Exposures" (exposures of 10% of the capital base or greater to an individual or related group); list of exposures to insiders and related persons; list of non-performing assets. Annually: Audit report by independent external auditor; balance sheet and profit & loss account. Disclosure: Must submit audit report to shareholders; must publish audited financial statements in at least one newspaper of general circulation; must display audited financial statements in a conspicuous location in the institution's head office. (Directive on Minimum Capital Ratios for FIs, Part III, Section 2) (Directive on Audits, Parts IV and V) (Directive on Large Exposures, Part VI) (Directive on Related Transactions, Part V) (Banking Act, 1989, Para. 19) (Directive on Asset Quality for FIs, Part III).
Malawi Union of Savings and Credit Cooperatives (MUSCCO) & its member SACCOs
Ministry of Industry and Commerce's Registrar of Cooperatives sits on MUSCCO's Board of Directors. In addition, Registrar audits SACCOs annually and has unfettered access to a SACCO's books, documents, and any other relevant information. Registrar can also inspect a SACCO upon request by: a majority of the society's Board; 1/3 of the SACCO's members; a creditor of the SACCO; one or more SACCOs with respect to MUSCCO; or on the Registrar's own accord (Luboyeski et al. 2004) (Cooperative Societies Act, 1946, Acts 34-36 & Cooperative Societies Rules, 1946, Rule 66 [per WOCCU Guide]).
Monthly: Reports to the Registrar of Cooperatives, though in practice these are rarely independently verified. Annually: Must submit a balance sheet, including profit and loss statement, to the Registration of Cooperatives. In addition, must disclose society's financial activities at annual meeting. (Luboyeski et al. 2004) (Cooperative Societies Rules, 1946, Rule 53 [per WOCCU Guide]).
Each SACCO that is a member of MUSCCO must contribute 0.25% of its monthly savings and outstanding loans to a microinsurance fund that reimburses SACCOs for unpaid loans in the event of a borrower's death or disability (Luboyeski et al. 2004).
Other Savings and Credit Cooperatives
Registrar audits SACCOs annually has unfettered access to a SACCO's books, documents, and any other relevant information. Registrar can inspect a SACCO upon request by: a majority of the society's Board; 1/3 of the SACCO's members; a creditor of the SACCO; one or more SACCOs with respect to any federation of SACCOs; or on the Registrar's own accord (Luboyeski et al. 2004) (Cooperative Societies Act, 1946, Acts 34-36 & Cooperative Societies Rules, 1946, Rule 66 [per WOCCU Guide]).
Monthly: Reports to the Registrar of Cooperatives, though in practice these are rarely independently verified. Annually: Must submit a balance sheet, including profit and loss statement, to the Registration of Cooperatives. In addition, must disclose society's financial activities at annual meeting. (Luboyeski et al. 2004) (Cooperative Societies Rules, 1946, Rule 53 [per WOCCU Guide]).
Annual returns to Registrar of Companies, including balance sheet, income statement, and cash flow statement, as required by the Companies Act, 1984. PRIDE Malawi also provides the UNCDF/UNDP and the government with quarterly reports of ongoing activities (Luboyeski et al. 2004) (Regulatory Assessment, IFAC).
Reporting: Annually: Audited annual financial statements; annual report outlining activities undertaken in the past year; annual return detailing information about trustees, directors, officers, and auditors; and list of sources of funding (NGO Act 2000, Section 22)
