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Highlights of Microfinance Act
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Microcredit Agencies:
 Licensing and entry requirements
 Reporting requirements
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Non-Deposit MFIs
 Licensing and entry requirements
 Reporting requirements
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Compliance and Enforcement
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Exit Administration

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The following are exempt from the provisions of the Act (S4)
 SACCOs
 Small member based institutions
 Those below threshold to be determined by the Registrar

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Microfinance Service Providers have to be
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Registered as a microcredit agency; or
Licensed as a non-deposit taking MFI; or
Licensed as a deposit taking MFI; or
Approved licensed financial institution.
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Microfinance Service Providers shall not engage in any other business other than the business specified on certificate/licence (s8)

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Microfinance Service Providers shall conduct business at place specified on licence/certificate (s9)
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Change/ closing of place of business requires giving prior notice to Registrar
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A Microfinance Service Providers whose licence/certificate/approval is suspended or revoked shall not continue top conduct any microfinance business (s12)

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A microfinance institution has as its primary funtion the provision of microfinance services i.e. no more than

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Rationale – establish requirements for registration; supervision; and minimum market conduct
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Objectives:
 To register MCAs
 To ensure adherence to high standards of market conduct

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Legal status – not restricted
Application – Schedule 1
Viable business plan
Clean CVs for chief executive/directors
Resolution of parent company – foreign owned only
By-laws reflecting corporate governance – how to appoint directors/senior management
Application fees of K50,000 – non-refundable

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Reporting:
 Biannual reports (Schedule II) – qualitative/financial reports within 6 weeks after half year
 Audited (by certified auditor) annual accounts –
4 months after end of year
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MCAs to apply for licence as non-deposit taking upon attaining:
 Assets worth K100.0 million
 Annual turnover of K300.0 million
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Other Directives may be introduced

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Rationale – establish requirements for licensing; supervision; and minimum market conduct standards
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Objectives:
 To license all NDTIs
 To ensure adhere to high standards of market conduct and corporate governance

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Legal status – restricted to companies
(guarantee or shares)
Capital or guarantee of K75.0 million
Application supported by:
• Business plan - scope of operations, description and rationale of services and capacity;
• Projected balance sheet and income statement for 3 years stating assumptions basing on feasibility analysis;
• Written risk management systems; and
• Name and address of applicant’s auditors.

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Clean CVs for CEO, directors, as well as shareholders information;
In case of foreign-owned:
 Consent letter from shareholders’ home supervisory authority allowing applicant to invest in Malawi; and
 Resolution of the applicant approving establishment of subsidiary in Malawi
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A memorandum of association and articles of association or byelaws – focusing corporate governance; and
Non-refundable application fee of K100,000

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Reporting:
 Quarterly reports of operations (Schedule II) - not later than 6 weeks after the end of each quarter; and
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 audited annual accounts – 4 months after year end
Prudential supervision:
 Asset base of K500 million; or
 Annual revenues in excess of K600 million
To comply with directives for prudentially-regulated
MFIs !!!

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Minimum governance standards:
 Management comprising a CEO and at least 1 other senior officer, e.g. chief financial officer or head of operation; and
 Minimum qualification of diploma in relevant fields plus at least 3 years experience in financial sector
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An NDTI to:
 Establish internal audit unit or committee; and
 Appoint external auditor
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Other directives to be introduced as we go

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Inspection of books of account and records
Reporting to credit reference bureaus
Accessing credit report to ascertain credit status of loan applicants
Reporting suspicious transactions to FIU
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Maintaining confidentiality of dealings and relation with clients
Exceptional disclosure granted when required by law, court order or Registrar

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Transparent pricing:
 Disclosures – prices, other charges, insurance premiums, loan processing fees, etc.
 Collateral requirements – savings, assets
Take-home pay requirement as per Employment Act
Interest calculation basing on reducing balance method – straight line method outlawed!!
Partial or total loan prepayment allowed – penalties, if any, to be described in contract
Compulsory savings allowed - but not for intermediation!!!

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Display registration certificate/licence, interest rates/other charges, rights and obligations, etc.
Penalties for offences, e.g. late submission of returns, other non-compliances
Complaints resolution
 Complaint receiving channel – designate staff
 Complaint resolution – designate staff or committee to investigate and resolve issues with clients
 Open register of complaints and resolutions
 Report to Registrar resolved/unresolved complaints
 Advise clients to report unresolved complaints to
Registrar

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Human capacity – skills, knowledge, etc.
Management information systems
Operational infrastructure, e.g. computers, network, electricity, etc.
High default, high operating expenses
Compliance – governance, prudential, etc
Fear of the Invisible Hand - Registrar

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Possible membership of money-lending institutions – institutionalization and enhancement of best practices in industry
Industry image
Resource mobilization – financial strengthening of Network
Downscaling of banks – threat or complementary??

Thank you for your attention
Questions/Comments?