Country Financial Sector Profilesback

Financial Sector Overview

Economic Landscape

A landlocked territory of sub-Saharan Africa, Malawi is ranked among the least developed countries on the continent with a GDP per capita of USD 389.4 in 2018, one of the lowest in the world. The country’s GDP grew steadily at the average rate of 6.5% between 2005 and 2011. This relatively high growth was hampered by the sharp fall in export earnings, in particular tobacco, a significant decline in FDI inflows (from 10.2% in 2011 to 1.4% in 2018) and the suspension of budget support. This suspension came after the 48% devaluation of the Malawian currency, the Kwacha (MWK), in May 2012. The country also faces major infrastructure deficits, particularly in the energy sector. This hinders industrial and commercial activities while reducing the potential for economic growth. In addition, the 2015 and 2016 climate shocks (floods and droughts) and the resulting food insecurity led to a significant increase in public debt, which represented 55% of GDP in 2017, according to the IMF. The high level of inflation (above 21% between 2014 and 2016) exacerbated the unfavourable economic conditions. Average GDP growth, therefore, declined between 2012 and 2018 to 3.6%, a level slightly higher than the sub-Saharan average (3,2%). The agricultural sector dominates the economy and provides livelihoods for two-thirds of the population, but accounts for barely one-third of GDP. This low-productivity and essentially rainfed agriculture makes the economy more vulnerable to adverse weather conditions. Poverty remains high with about 70% of the population living below the international poverty line (World Bank, 2018). The business climate is still unattractive although there has been some progress. In the World Bank’s Doing Business report, the country was ranked 109th in 2019 (out of 190 economies), up 2 spots from 2018 and 48 spots from 2012. The authorities prepared a Third Malawi Growth and Development Strategy (MGDS III) for the period 2017-2022, which aims to build a productive, competitive, and resilient nation.

Overview of the Financial Sector

Malawi’s financial sector consists of nine banks, nine microfinance institutions (MFI), 13 financial cooperatives (SACCO), 13 insurance companies, several pension funds and a stock exchange. It is dominated by banks, which represent about 61% of financial sector assets (IMF, 2015). The directive on the licensing and regulation of holding companies came into effect in 2018, and the guidelines on Islamic banking services were approved in October 2017.

Banking Sector

Structure of the Banking Market – As of 31 December 2018, the banking sector comprised nine private banks, including five banks with local capital and four banks with foreign capital. In 2018, local banks held 56.4% of the sector’s assets (57.4% in 2017) compared to 43.6% for foreign banks (42.6% in 2017). Two banks dominated the sector with 46% of assets, 46.2% of deposits and 58.1% of loans in June 2019. The sector had 106 branches in 2018, against 90 in 2017. Total sector assets increased 4.4% from December 2018 to MWK 1,744.1 billion (USD 2.4 billion) in June 2019, an increase largely due to increased lending and the development of leasing services. Investments and securities constitute the majority component (40.1%) of bank assets.

Structure of Banking Sector Loans and Deposits – Bank loans remain concentrated. The two largest commercial banks favour only large companies and government securities, which are more profitable than lending to the private sector. In 2017, government held about 23% of the loans (11% in 2012), whereas it only provided about 9% of banking sector deposits. Between 2012 and 2017, banks doubled their holdings of government securities, to about 30% of total assets. Bank credit to the private sector remains low: MWK 538.2 billion (USD 731.2 million) in September 2019, or 9% of GDP, against 10.5% of GDP in 2016. Gross loans remained concentrated in three sectors: wholesale and retail trade, agriculture and manufacturing services. In June 2019, these three sectors represented 58.7% of loans and leases. Customer deposits constitute 65% of sources of bank financing and are dominated by demand deposits (37%), followed by term deposits (23.8%) and foreign currency deposits (22.4%).

Lending and Borrowing Interest Rates – Several measures have been adopted by the Monetary Policy Committee to stimulate economic growth. These include the reduction in the key rate, from 14.5% to 13.5% between January and May 2019, and the compulsory reserve ratio from 7.5% to 5% for deposits in local currency and from 7.5% to 3.75% for commitments in foreign currency. In addition, base lending rates are now indexed to the Lombard rate (which was also reduced from 14.9% to 13.9% between January and May 2019): a measure that strengthens the consideration of risk perception in competition between commercial banks. After observing previously high levels, overall inflation declined relatively to 12.4% in 2018, with the medium-term inflation target of 5% by 2021.

Financial Soundness of the banking sector – The domestic banking sector adopted the principles of Basel II in January 2014. Banks are required to maintain a basic minimum capital of USD 5 million (USD 1.5 million for leasing companies). Overall, the banking sector remains sufficiently capitalised, liquid and profitable, with improved asset quality, in accordance with regulatory requirements. Basic capital and total capital ratios stood at 16.4% and 20.4%, respectively, in June 2019, levels above the regulatory minimums of 10% and 15%. Sector asset quality has improved significantly, in terms of the ratio of non-performing loans, which, for the first time since 2012, reached a level consistent with the maximum threshold of 5%. It fell from 15.7% in 2017 to 6,1% in 2018, then to 4.8% in June 2019. Improved loan recovery and the write-off of non-performing loans have contributed to improving asset quality. The provisioning requirements of IFRS 9 (implemented since January 2018) have kept the provisioning rate for non-performing loans at a level that meets the minimum of 20%. The latter stood at 55% in June 2019. The liquidity ratio reached 59.1% in June 2019, for a regulatory minimum set at 25%. Return on assets (ROA) and return on equity (ROE) were 2.8% and 21.2%, respectively.

Financial Inclusion

The objective of the NFIS is to bring the percentage of the adult population financially included to 55% by 2020, against 33% in 2014. According to the World Bank’s Global Findex, financial inclusion has improved significantly in recent years. 33.7% of adults had an account in 2017. Although this level is lower than the sub-Saharan average (42.6%), it reflects an increase of 86.2% compared to 2014. This progress stems from several factors including: (i) the increase of more than 430% in the adult population with a mobile money account, (ii) steady growth in point-of-sale terminals, which more than doubled between August 2016 and September 2019, from 1,119 to 2,363, and (iii) the innovation brought by mobile banking services.

Despite these improvements, barriers to financial inclusion persist. The level of financial education of the population remains low: 44% of adults involved in a conflict with a financial service provider are unaware of the existence of government agencies that can be contacted for this purpose. The use of formal financial services is further hampered by the absence, for many adults, of national identity cards. This results in an expansion of informal lending systems, which continue to be popular, particularly in rural areas. The number of members of Village Savings and Loan Associations (VSLA) increased by more than one million adults between 2008 and 2014, compared to only 115,000 for adults saving in a bank during the same period. 14% of adults use only informal services and 17% of adults save in informal groups. The remoteness of financial institutions is also an obstacle to financial inclusion. Profitability of financial services in rural areas remains low due to high levels of poverty, uncertainty in farm incomes, and the high cost of providing financial services caused by the lack of socio-economic infrastructure.

The Microfinance Sector

In 2018, the microfinance sector consisted of 40 microcredit agencies, one microfinance institution (MFI) accepting deposits, eight MFIs not accepting deposits and 37 approved financial cooperatives (SACCO), six of which are community SACCOs. The total number of clients served in 2018 was 39,412 for MFIs accepting deposits (including 63.4% of women), 359,166 for MFIs not accepting deposits (including 55.8% of men) and 123,553 for SACCOs (including 32% of women).

MFIs are regulated and supervised by the Central Bank, while prudential supervision of SACCOs is carried out jointly by the Malawi Union of Saving and Credit Cooperatives (MUSCCO), a national umbrella organisation. Microcredit agencies are supervised by the Malawi Microfinance Network (MAMN). The laws on financial services and microfinance published in 2010 constitute the legal framework governing the regulation and supervision of the microfinance sector. To these are added the additional guidelines on various specific issues. Minimum regulatory capital requirements are set at MWK 250 million (USD 341,206) for microfinance institutions accepting deposits, and MWK 100 million (USD 136,817) for MFIs not accepting deposits.

Total sector assets (microcredit agencies and MFIs) reached MWK 38.1 billion (USD 51.8 million) in 2018, including 32.5% for MFIs accepting deposits and 58.5% for MFIs not accepting deposits. In 2018, MFIs accepting deposits remained well capitalised. The capital adequacy ratio (Tier 1) and that of total capital for microfinance institutions accepting deposits stood at 22% and 32.4% in 2018, levels above the regulatory minimums of 10% and 15%, respectively. Asset quality also improved in terms of the ratio of non-performing loans, which fell from 5.3% in 2017 to 4,8% in 2018, a level consistent with the regulatory ceiling of 5%. The return on assets (ROA) and return on equity (ROE) ratios increased, respectively, from 0.8% and 5.1% in 2017 to 2.4% and 7.9% in 2018. The asset quality of institutions not accepting deposits, on the other hand, deteriorated in 2018, as evidenced by the increase in the ratio of non-performing loans. The latter rose from 7.8% in 2017 to 8.5% in 2018, well above the regulatory maximum of 5%. This increase in the ratio of non-performing loans is partly attributed to high lending rates that increase the volume of debt. SACCO assets reached MWK 19.1 billion (USD 29.6 million) in 2018, an increase of 35.6% compared to 2017. Loans and advances granted to members represented 68% of total assets in 2018, while funding for this subsector relies heavily on member savings, representing 74.8% of total assets. SACCOs also remain sufficiently capitalised overall. The capital adequacy ratio was 19.1% in 2018, higher than the minimum regulatory requirement of 10% of risk-weighted assets. The ratio of non-performing loans reached 5.6% in 2018, slightly above the 5% ceiling.

Although capital provided in the form of grants or loans at almost zero rate enables MFIs to remain operational, the latter remain limited in their growth potential due to the high cost of access to capital, both through banks and through the capital market. Over 80% of all MFI clients are located in rural areas (FinScope, 2014) where the prevalence of information asymmetry is quite high. This results in high costs of loan portfolio administration. Governance and management systems-related issues are also central to the long-term sustainability of SACCOs. Although the elected members of the SACCO Board of Directors receive training in the management of financial cooperatives, the relatively short duration of their mandate (maximum of two consecutive mandates of three years each) reduces the capacity of SACCOs to take advantage of this knowledge gain.

Digital Finance

A law enacted in 2016 provides for the operation, regulation and supervision of payment, clearing and settlement systems in Malawi. This sector, regulated by the Central Bank, has made significant progress, due to the establishment of the Malawi Interbank Transfer and Settlement System (MITASS). Mobile payments increased from about 186,000 transactions in December 2012 to 4.5 million transactions in May 2018, and a regulatory framework for electronic money became effective in the third quarter of 2019.  Another regulation on the deployment and use of electronic money channels, published by the Ministry of Trade and Industry under the law on commercial licences, aims to make the adoption and use of electronic payment services compulsory at approved points of sale. All commercial banks are integrated into the national switch. The interoperability of the retail payment system is also improving significantly. The integration of mobile money services into the national switch, approved since June 2018, includes several services such as bill payments and person-to-person payments (P2P). In November 2018, two mobile network operators completed their integration into the national switch. Another project focused on the integration of a Microfinance Transmission Processing Hub (MFI-TPH) into the national switch. 16 non-banking institutions (MFIs and SACCOs) were thus identified for the implementation of the pilot project and five of them became operational since June 2018.

Despite the increase in the subscriber base, activity rates remain low with more than 60% of subscribers, who do not actively use (over a 90-day period) mobile money services. This situation is due, in part, to a low awareness of the population, especially that living in rural areas, about the various benefits of mobile money services. The geographical distribution of mobile money agents also remains uneven. Out of 45,929 agents registered in June 2019, about 81% are in urban areas and only 19% serve rural areas, representing almost 80% of the population. The use of cash remains predominant in the economy and more than 90% of transactions are still carried out in cash.

Financing of SMEs

Micro, Small and Medium-Sized Enterprises (MSME) play an important role in the Malawian economy. SMEs employ up to 1 million people, and their economic activities are the main source of income for 70% of the country’s population. However, almost 60% of MSMEs are financially excluded and 44% of them identify the lack of access to financing as a major constraint for their activities. Various factors explain this constraint. Most MSMEs are retailers who market agricultural produce (about 63% of MSMEs are engaged in the agricultural sector) or other goods with little added value, a situation which makes banks sceptical about their repayment capacity in the event of a loan grant. This is exacerbated by the lack of appropriate management and governance structures or operational procedures. About 98% of MSMEs are effectively not officially registered. Most of these enterprises are located in rural areas where demand for financial services is hampered by proximity and infrastructure problems. Bank credit, often unsuited to the needs of SMEs, pushes them to turn to informal sources of financing. 29% of MSMEs have acquired loans from non-formal sources, such as VSLAs or from family and friends. According to FinMarkTrust (2015), about 17% of MSMEs choose to save in banks, while a larger proportion (20%) opt for hoarding.

The Insurance Sector

The insurance sector consists of five life insurance companies, eight non-life insurance companies and one reinsurance company. With a combined total of 197,427 insurance policies, gross non-life insurance premium income increased 15.3% to MWK 48.1 billion (USD 65.3 million) in 2018, a growth largely due to the increase (13% in 2018) in insurance premiums in the automotive segment. The latter, mandatory for vehicle owners, is the most important class (57.9% of gross premiums in 2018) in non-life insurance. Total recorded non-life insurance assets reached MWK 48.5 billion in 2018 (USD 65.9 million), an increase of 13.1%. This performance is attributed to an increase in gross premium income and the additional capital injected by two companies in order to comply with the minimum capital and solvency requirements. The asset portfolio of insurance companies is dominated by investments (in real estate, government securities, equities, term deposits and loans), whose share represented 54.9% of the total in 2018. The number of people covered by group life insurance is still low, rising from 235,871 in 2017 to 346,053 in 2018. Life insurance assets reached MWK 165.1 billion (USD 224.4 million) in 2018. Investments on the capital market represented 97.3% of total sector assets (93.9% in 2017); most of which go to listed and unlisted stocks (50.9% in 2018), followed by government securities (35.3% in 2018).

One of the main threats to the sector remains the insufficient solvency margin of certain companies, particularly in the non-life insurance sector. The solvency ratio was 14.9% in June 2019 (16% in December 2018), a level significantly lower than the minimum regulatory requirement of 20%. In June 2019, four companies, representing 38% of the market share, recorded solvency ratios below this requirement, while six of the eight companies in the branch did not meet the basic capital requirements of MWK 600 million (USD 819,145). The insurance penetration rate remains low (2% in 2018). This low rate is partly due to the low income level of households for which insurance products remain financially inaccessible. Another challenge remains the slowness of customer complaints and compensation procedures, a situation which further erodes customers’ already fragile confidence in insurance. In addition, the supposedly complex nature of insurance products, which, combined with the low level of education on insurance matters, affects the consumer subscription rate. The results of the 2018 survey on financial education and consumer protection showed that 67.3% of the population did not know the meaning of the word "insurance".

The Capital Market

In 2018, the capital market included a stock exchange led by four brokerage firms, two collective investment schemes, seven investment advisers, four transfer secretaries and five portfolio managers. The Stock Exchange has existed since 1994, but only started trading the first shares in 1996. Stock market activity has improved significantly. The number of transactions increased from 1,189 in 2017 to 2,153 in 2018, an increase in activity due mainly to the improved performance of listed companies. This situation has increased the attractiveness of the stock market as an alternative investment platform. The number of shares traded on the stock exchange reached 958 million in 2018, compared to 699 million in 2017, and the value of transactions increased to MWK 48.7 billion (USD 66.2 million) in 2018, against MWK 13.5 billion (USD 18.3 million) in 2017. The introduction of an automated trading system (ATS) in June 2018 improved the efficiency of the stock market, resulting in faster transaction processing and reduced settlement times. In 2018, 13 companies were listed on the stock exchange. Corporate bonds are almost absent. Government, through the Central Bank, issues publicly traded bonds, but the secondary market experiences little or no activity.

Ultimately, the stock market remains illiquid. The limited activities on the primary market and a still latent secondary market force investors, mainly institutional, to favour the "buy and hold" strategy. Investment opportunities remain limited with few listed shares.

Social Security

The national compulsory pension system, which went into force in June 2011, creates individual retirement accounts for private sector workers paid above a minimum wage threshold. The rate of 15% of the employee’s basic monthly salary (10% of employer contributions and 5% salary), in the form of minimum monthly retirement contributions, must be paid by the employer into the employee’s pension account. Public sector workers are covered by a Government Public Pension Scheme (GPPS). Pension funds have continued to grow in terms of assets since the introduction of the compulsory pension scheme. Pension sector assets increased by 34.6% to MWK 716.5 billion (USD 973.6 million) in 2018, due to higher contributions and higher investment income. The Public Service Pension Fund had 77,910 members with total assets reaching MWK 28.8 billion (USD 39.1 million) in 2018. Sector asset portfolio remains fairly diversified; investments in listed equities are the predominant asset class (38.1%), followed by government securities (33%). There are no specific restrictions to the investment of pension funds, but diversification in the allocation of assets by the administrators of these funds is recommended. A draft directive sets the investment limit for pension funds in foreign asset categories at 15% (OECD, 2019).

Contact Details Information of Banks Operating in Malawi - 2018







 CDH House, 5 Independence Drive,
P.O. Box 1444, Blantyre, Malawi

 (+265) 1 821 300


 Bt: Victoria Ave

 (+265) 1 879 777


 1st floor, Umoyo House, Victoria Ave

 (+265) 01 820 219


 1st floor, Livingstone Towers, Glyn Jones Rd

 (+265) 1821942



 Top Mandala

 (+265) 1820055



  Blantyre: MSB House, Victoria Avenue

 (+265) 01 825 111




 (+265) 1820622


 Blantyre: NBS House, Ginnery

 (+265) 1 871 554


  Blantyre: Plantation House, Victoria Ave

 (+265) 01 820 477


 Kamuzu Procession Road , Plot nos 4/046-048, Lilongwe City

 (+265) 1758403


  Lilongwe: African Unity Ave. Capital City



 Mwai House, Independence Drive
Plot Number 13/112

 (+265) 1772500



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At a Glance

At a Glance Source
Population in thousands (2017): 18,622.1
GDP per capita (current US$) 2017 - World Average 10,721.61: 338.48
Account (%) age 15+) - (2014 vs 2017): 18% | 34%
Agriculture Orientation Index - Credit ( Agriculture, Forestry and Fisheries share of GDP) (2015 vs 2016): 1.00 | 0.88
Financial Inclusion Strategies: • The Malawi National Strategy for Financial Inclusion (2010–2014)• SADC Financial Inclusion Strategy 2016-2021
Domestic credit provided by financial sector (% of GDP) 2017: n/a
Made or received digital payments in the past year (% age 15+) (2014 vs 2017): 11% | 28%
Remittances % of GDP for 2017: 0.006
Mortgage Interest Rate / Mortgage Term (years): 35.5% | 10

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Dec 10, 2019 | International Monetary Fund
Sep 30, 2018 | X Gine, j. Goldberg | The World Bank
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Jun 14, 2017 | S. Truen, W. Jitsing, K. Kgaphola et al. | FinMark Trust