Expanding Access to Financial Services in Malawi

This report assesses the achievements and challenges for microfinance delivery in Malawi, with particular attention to agricultural and rural markets. The report:

• Identifies key elements that influence the development of Malawi's financial system;
• Provides recommendations for investors, donors, government and private sector entities to support the development of an inclusive financial system;
• Defines basic microfinance concepts.

The report discusses:

• Microfinance institutions (MFIs) as commercially viable institutions that are an integral part of the financial system;
• The growing demand for microfinance.

The report also presents the following features of the financial sector in Malawi:

• High interest rates and an uncertain future are major impediments to economic growth;
• The absence of broad-based market solutions has resulted in donor and government-affiliated projects;
• Significant disincentives exist for companies that invest in research and development (R&D).

The paper proposes the frontier of finance approach to understand the demand for and supply of financial services. The approach focuses on:

• The dynamic aspect of markets;
• Developing an inclusive financial system by strengthening current players;
• Extensive operational and financial restructuring;
• The idea of a new, scalable financial institution that can effectively serve rural markets.

The paper also discuses the following microfinance issues:

• Achievements and challenges;
• Technical support;
• Emergence of new companies;
• Transparency in reporting;
• Establishment of common performance benchmarks.

The paper lists legal and regulatory environment issues. It concludes by listing key recommendations for the development of an inclusive financial system in Malawi.