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Licensing of Development Finance Institutions (DFIs) in Malawi

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Citation and Interpretation

The directive may be cited as the Financial Services (Licensing of Development Finance Institutions) Directive, 2018. Key terms are defined in the interpretation section, including:

  • Application fee: The amount paid by an applicant for a license.
  • Applicant: A person or body corporate seeking a license to conduct business as a development finance institution.
  • Board: The regulatory authority responsible for overseeing the licensing process.
  • Development finance institution: An institution that provides medium and long-term finance for economic development.
  • Home supervisory authority: The regulatory authority in the applicant’s home country.
  • Institution: A body corporate that seeks a license to conduct business as a development finance institution.
  • License: Permission granted by the Registrar to conduct business as a development finance institution.
  • Principal shareholder: The majority shareholder of an institution.
  • Senior management official: A person responsible for managing an institution’s operations.
  • Shell company: A company with no or little business activity.

Objectives

The objectives of this directive are to:

  1. Establish licensing requirements for DFIs
  2. Specify information required by the Registrar in assessing licensing applications for DFIs
  3. Ensure that license applications for DFIs are objectively and consistently evaluated in a timely manner

Declaration of a Development Finance Institution as a Prudentially Regulated Financial Institution

A development finance institution is declared to be a prudentially regulated financial institution.

Permissible Activities of a Development Finance Institution

An institution may engage in the following activities:

  • Making available medium and long-term finance for economic development
  • Participating in equity in medium and long-term investments
  • Guaranteeing medium and long-term loans and other financial obligations
  • Mobilizing funds from sources within and outside the country to finance medium and long-term investments
  • Providing technical assistance and advisory services for the purpose of promoting sustainable economic development

Application Process

To conduct business as an institution, a person must apply to the Registrar for a license through a written letter signed by a representative of the shareholders.

Eligibility

Only body corporates shall be eligible to apply for a license.

The paid-up capital for a proposed institution shall be Malawi Kwacha equivalent of US$50,000,000.

Registration of Capital

Where an applicant is a foreign investor, the applicant must register the capital with the Reserve Bank of Malawi.