Micro-finance Policy and Development Framework: Malawi
Micro-finance Policy and Development Framework: Malawi
recent poverty profile (National Economic Council, 2000) suggests that these poor are characterised
by malnutrition, lack of income earning opportunities, and unfavourable production environment.
Female-headed households, which are estimated to be about 35% nationally, are consistently
poorer than male-headed households, and are mainly engaged in subsistence farming and petty
trading activities.
Available information shows that although there has been an increase in the number of institutions
offering micro-credit in Malawi, to date about 29, the main constraint to affordable access is the
high interest rates in the country. The second constraint is the high inflation rates which restricts
long-term lending. Moreover, the exorbitant interest rates (up to about 60%) and high inflation
make it difficult for the rural poor to save after borrowing funds for production. This contributes
to weakening the rural poor’s purchasing power and thereby intensifying their poverty status.
Another constraint to the credit sector is the involvement of the Government in some lending
institutions leading to the ineffective targeting of potential beneficiaries. Moreover the entry of
new commercial banks is hampered by the small size of the economy in the country. This affects
the competitive environment necessary for efficient delivery of credit.
The micro-finance sector in Malawi is not clearly covered by any specific legislation or regulatory
policy, and is therefore not supervised like other financial institutions. However, it is within the
recent Highly Indebted Poor Countries (HIPC) initiative to develop a Poverty Reduction Strategy
paper (PRSP) that the present thrust to develop a relevant policy framework at the country level
has arisen. The main objectives of a draft Micro-finance Policy (MFP) is to create an enabling
legal and regulatory environment conducive to the development of micro-finance; to improve
coordination between implementing institutions, Reserve Bank of Malawi (RBM) and the
Government of Malawi (GOM); to promote the best practices among the MFIs, GOM and the
donor community. Existing MFIs are registered under different legislation such as a private company,
or under the cooperatives act. The RBM which is mandated to supervise all financial institutions,
does not have the capacity to supervise or regulate all MFIs directly. Table 1 gives a profile of
some of the micro-credit initiatives in Malawi.
ECONOMIC RESEARCH PAPERS
NO 74
(January 2003)
Factors Impeding the Poverty Reduction Capacity of Micro-credit: Some Field Observations from Malawi and Ethiopia
by
Sunita Pitamber
Microfinance Policy and Development Framework Malawi - To learn more about this author, visit African Development Bank's Website.
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In Malawi poverty is more persistent in the rural areas at about 65.3% of the population. The
recent poverty profile (National Economic Council, 2000) suggests that these poor are characterised
by malnutrition, lack of income earning opportunities, and unfavourable production environment.
Female-headed households, which are estimated to be about 35% nationally, are consistently
poorer than male-headed households, and are mainly engaged in subsistence farming and petty
trading activities.
Available information shows that although there has been an increase in the number of institutions
offering micro-credit in Malawi, to date about 29, the main constraint to affordable access is the
high interest rates in the country. The second constraint is the high inflation rates which restricts
long-term lending. Moreover, the exorbitant interest rates (up to about 60%) and high inflation
make it difficult for the rural poor to save after borrowing funds for production. This contributes
to weakening the rural poor’s purchasing power and thereby intensifying their poverty status.
Another constraint to the credit sector is the involvement of the Government in some lending
institutions leading to the ineffective targeting of potential beneficiaries. Moreover the entry of
new commercial banks is hampered by the small size of the economy in the country. This affects
the competitive environment necessary for efficient delivery of credit.
The micro-finance sector in Malawi is not clearly covered by any specific legislation or regulatory
policy, and is therefore not supervised like other financial institutions. However, it is within the
recent Highly Indebted Poor Countries (HIPC) initiative to develop a Poverty Reduction Strategy
paper (PRSP) that the present thrust to develop a relevant policy framework at the country level
has arisen. The main objectives of a draft Micro-finance Policy (MFP) is to create an enabling
legal and regulatory environment conducive to the development of micro-finance; to improve
coordination between implementing institutions, Reserve Bank of Malawi (RBM) and the
Government of Malawi (GOM); to promote the best practices among the MFIs, GOM and the
donor community. Existing MFIs are registered under different legislation such as a private company,
or under the cooperatives act. The RBM which is mandated to supervise all financial institutions,
does not have the capacity to supervise or regulate all MFIs directly. Table 1 gives a profile of
some of the micro-credit initiatives in Malawi.
ECONOMIC RESEARCH PAPERS
NO 74
(January 2003)
Factors Impeding the Poverty Reduction Capacity of Micro-credit: Some Field Observations from Malawi and Ethiopia
by
Sunita Pitamber
Microfinance Policy and Development Framework Malawi - To learn more about this author, visit African Development Bank's Website.
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Linda RichardsonLinda Richardson is the Founder and Executive Chairwoman of Richardson, a global sales training and performance improvement company. As a recognized leader in the industry, she has won the coveted Stevie Award for Lifetime Achievement in Sales Excellence and she was identified by Training Industry, Inc. as one of the “Top 20 Most Influential Training Professionals.” Ms. Richardson is credited with the movement to Consultative Selling and is the author of ten books on selling and sales management, including Sales Coaching — Making the Great Leap from Sales Manager to Sales Coach, and Stop Telling, Start Selling. She teaches sales and management at the Wharton Graduate School of the University of Pennsylvania and the Wharton Executive Development Center. Linda is a frequent speaker at industry and client conferences, has been published extensively in industry and training journals, and has been featured in numerous publications, including The Wall Street Journal, Forbes, Nation’s Business, Selling Power, Success, and The Conference Board Magazine. Learn more about Richardson's sales training and performance improvement solutions at http://www.richardson.com web - Visit Linda Richardson's Website |
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