Malawi: "Solid Progress" on Legislation to Cover Microfinance Sector
Malawi, January, 22 2009 -
The Ministry of Justice and Constitutional Affairs, an executive branch agency responsible for the country's legal sector, reported that work to complete customization of the Microfinance and Financial Cooperatives bills is close to an end.
This progress is further confirmed by Anthony Kamanga, Principal Secretary of the Ministry of Justice, who mentioned in an interview that there was solid progress.
However, Kamanga cautioned that efforts could be hampered by parliamentary processes, and added that, "the problem we always face to ensure that these draft bills see the light of the (sic) day has been working with parliament; we cannot dictate things to them…and waiting for them always leads into unnecessary delays."
There are currently nine Malawi MFIs that report to the MIX Market, the microfinance information clearinghouse.
In a paper Development of Malawi's Microfinance Regulation and Supervision, Aleksandr-Alain Kalanda, Head of Risk and Standards at Opportunity International Bank of Malawi (OIBM), a commercial bank which targets the poor in underserved areas including peri-urban and rural areas, claimed that the microfinance industry in Malawi is, "relatively underdeveloped and operating with limited outreach"
According to the article, existing MFIs include non-governmental organizations (NGOs), Savings and Credit Cooperatives (SACCOs), partially or fully state-owned corporations (parastatals), private companies, and projects of international development agencies and donors.
Additionally, the microfinance sector is not covered by any coherent legislation or regulatory policy.
Instead, MFIs are currently regulated by a wide range of different legislative instruments. NGOs are registered under the Trustees Incorporation Act, SACCOs under the Cooperative Societies Act, and the parastatals under other specific acts.
These laws are difficult to administer since they are not within the jurisdiction of the Reserve Bank of Malawi (RBM), the formal regulatory agency of the financial services sector.
Meanwhile, the traditional financial sector is currently regulated through the Financial Services, Banking, and Insurance Act of 1957, in addition to the Business Names Registration and Companies Acts of 1984.
According to a report in the Daily Times, the Microfinance and Financial Cooperatives bills submitted to the Ministry of Justice provide for the regulation and supervision of microfinance services, as well as the licensing and registration of MFIs.
Specifically, the bills will help promote integration with existing legislation in keeping with Malawi's National Microfinance Policy, and additionally increase transparency in lending transactions.
The Financial Cooperatives bill in particular intends to elevate cooperatives to the same level as banks, enabling them to offer lending and borrowing services via established banking practices. The same report claimed that the move is a response to criticisms from the country's financial industry that the unavailability of timely laws for the sector at large has stifled economic development.
In the same article, Deputy Governor of the Reserve Bank of Malawi Mary Nkosi likewise bemoaned delays to pass financial bills into law, saying the issue had negatively affected the performance of financial services.