Reserve Bank of Malawi warns microfinance players

The Reserve Bank of Malawi (RBM) has warned that it will not allow any microfinance player to involve itself in unfair practices.

RBM chief examiner Duncan Mphande issued the warning at an annual general meeting held by the Malawi Microfinance Network in (Mamn) in the capital Lilongwe on Friday.

The warning comes at a time when microfinance is now recognised as part of the formal financial system in Malawi as it is now regulated and supervised by the central bank.

“Reserve Bank expects adoption of fair and best practices in pricing and loan collection so that the image of the microfinance industry improves,” said Mphande.

He challenged players in the industry that Malawi cannot achieve financial inclusion if cases of abusive lending and loan collection are prevalent in the country.

Mphande said RBM considers Mamn as a strategic partner in achieving increased access to affordable financial inclusion services in Malawi.

He, however, said RBM is aware of challenges facing the microfinance sector which include limited financial and human resources mobilisation.

“I, therefore, urge network members to put heads together and identify sustainable sources of revenue. Only a well-resourced network can guarantee sustainable service delivery to its members,” said Mphande.

On recent strides in financial sector reforms, Mphande singled out the enactment of Financial Services Act, Microfinance Act and the Financial Cooperatives Act as major milestones in the industry.

He also said the microfinance network has been collecting, analysing and disseminating microfinance information which he said has benefited the general public.

Mphande also commended the network for its role in lobbying for a conducive microfinance environment.

But he admitted that RBM does not have enough capacity to effectively supervise all microfinance players and called upon respective institutions to cooperate with the network and the Malawi Union of Savings and Credit Cooperatives (Muscco) in their capacity as self-regulatory authorities.

In his remarks, Mamn chairperson Joseph Mononga hailed RBM for its supervisory role and assured the central bank of effective delivery of their services.

“We, as a network, want to assure the authorities that we will do our best to ensure that the microfinance sector plays its rightful role in the delivery of financial services to those currently regarded as excluded in the system,” said Mononga.

But he, however, said the network is mindful of the fact that legal and regulatory framework comes with challenges to the microfinance institutions in order to meet compliance requirements.

Mononga said Mamn will work with government, RBM and other co-operating partners in ensuring that capacity challenges are addressed.