Development of Malawi's Microfinance Regulation and Supervision

Assessing MFIs, their registration status, performance and regulatory landscape
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This document presents an overview of microfinance regulation and supervision in Malawi. The microfinance industry in Malawi is relatively underdeveloped, with limited outreach. It has 20 registered actors but only six of them provide financial services as their core activity.

The microfinance sector is currently regulated by an array of legislative instruments. Features include:

  • NGOs are registered under the Trustees Incorporation Act, parastatals under specific Acts, and SACCOs under the Cooperative Societies Act;
  • Most legislative instruments are difficult to administer since they are outside the jurisdiction of the Reserve Bank Malawi (RBM);
  • No serious legislative issues impede entry or exit of players in the sector;
  • Existing regulatory framework for commercial banks is based on the Basel accords;
  • Government of Malawi has approved a Microfinance Policy and Action Plan to facilitate adoption of best practices by the sector.

There is an urgent need to professionalize MFIs so that they have appropriate governance structures and sound risk management policies and procedures, including effective management information systems and quality external audits. It is necessary to build RBM’s capacity to regulate and supervise the industry.