Financial Crime World

Malawi’s Regulatory Requirements for Financial Institutions: A Comprehensive Overview

The financial sector in Malawi is subject to a range of regulatory requirements aimed at ensuring stability, transparency, and consumer protection. In this article, we will provide an overview of the key regulations governing financial institutions in Malawi.

Regulatory Framework

The Reserve Bank of Malawi (RBM) is the central bank responsible for regulating and supervising the country’s financial sector. The RBM has issued a range of guidelines and regulations aimed at promoting stability and protecting consumers.

Key Regulatory Requirements

  • Business Licensing Regulations: All licensed entities are required to deploy and use one or more electronic payment channels for payment of goods and services.
  • Value Added Tax (VAT) Act: Businesses with annual revenue turnover over MKW 10 million must register and mandate the use of electronic fiscal devices.
  • Point of Sale (POS) Devices: All businesses with an annual revenue turnover of over MKW 10 million are required to deploy POS devices at their premises.

Banking Regulations

Malawi’s banking sector is regulated by the RBM, which has issued guidelines on capital adequacy and liquidity ratio. The RBM also enforces international accounting standards adopted by the Institute of Chartered Accountants in Malawi (ICAM).

Key Requirements

  • Capital Requirements: Banks are required to maintain a minimum capital adequacy ratio of 10%.
  • Liquidity Ratio: Banks must maintain a minimum liquidity ratio of 20%.

Foreign Exchange Controls

The RBM has a mandate to manage the exchange rate to maintain a sustainable balance of payments position, attain stable domestic prices, and foster growth in real income. While foreign exchange markets operate freely, the RBM continues to exert influence on the exchange rate.

Key Aspects

  • Exchange Rate Management: The official exchange rate is usually below the black market and bureau rates tend to price kwacha at a slight discount to the USD.
  • Foreign Exchange Reserve Requirements: Malawi’s foreign reserves are critically low, resulting in shortages of essential imported commodities such as fuel, fertilizer, and medicine.