Overview

The adoption of microfinance in Malawi as a means to expand credit, savings options, and other financial services for low-income clients took shape following the inaugural national forum for microfinance in 1997. This event spurred the creation of a microfinance policy and an action plan in 2002, aimed at facilitating and promoting the adoption of universally recognized best practices among those involved in offering microfinance services. Prior to the formulation of this policy, a fragmented approach to microfinance had repercussions on affordability, outreach, and sustainability. At that time, microfinance predominantly took the form of agricultural credit and business finance, with government parastatals like the Small Enterprise Development of Malawi (SEDOM), Development of Malawian Traders Trust (DEMATT), and Malawi Rural Finance Company (MRFC) being the major players. Private sector microfinance companies, such as Pride Malawi, Indefund, and FINCA, also operated in Malawi. Although the number of microfinance providers increased over the years, the sector remained unregulated.

It wasn't until 2010 that microfinance institutions in Malawi came under regulation with the enactment of the Microfinance Act. Microfinance, defined as the provision of limited financial services to low-income individuals and small, informal businesses, is offered by various financial institutions, including banks and non-banks, either as a core business or part of a diversified portfolio. The regulatory approach is tailored to the type, complexity, and size of the institution. As such, the law categorizes providers of microfinance services into deposit-taking and non-deposit-taking microfinance institutions.