Financial Crime World

Regulatory Requirements for Banks Engaging in Non-Interest Banking Activities in Malawi

Governance

Shariah Board Requirements

  • The bank must have an independent Shariah board or advisors to oversee the development and implementation of Shariah-compliant products.
  • The Shariah board should comprise at least three members with the following expertise:
    • A Shariah scholar based in Malawi or abroad
    • A person of high integrity, honesty, professionalism, and ethical behavior
    • A person with experience, skills, and knowledge in delivering Shariah rulings and issuing scholarly opinions on Islamic law and finance

Roles and Responsibilities of the Shariah Board

  • Review and approve non-interest banking products
  • Certify that products/services are Shariah compliant
  • Develop innovative Shariah-compliant products
  • Conduct training for staff on non-interest banking
  • Issue a report confirming the Shariah review

Audit and Compliance

Internal Audit Requirements

  • The bank must have an internal audit structure to assess control procedures for addressing specific risks associated with non-interest banking products.

Risk Management Requirements

  • The bank must develop policies, systems, and procedures to identify, measure, monitor, and control risk exposures in line with the Risk Management Guidelines for Banks.

Prudential Requirements

Liquidity Requirements

  • The bank must comply with the Reserve Bank of Malawi’s Liquidity Reserve Requirements Directive.

Risk Weighting

  • Non-interest banking products will be mapped to conventional products for regulatory treatment purposes.

Permissible Non-Interest Banking Products

The following non-interest banking products are permissible:

  • Murabaha
  • Mudaraba
  • Musaharaka
  • Diminishing Musharaka
  • Ijarah
  • Istisna

Accounting, Reporting, and Disclosure

Accounting Standards

  • The bank must comply with International Financial Reporting Standards (IFRS) or International Accounting Standards (IAS).

Reporting Requirements

  • The bank must report its banking activities to the Registrar in the prescribed form and frequency.

Transparency and Market Discipline

  • The bank must establish an effective disclosure regime on all non-interest banking products.

AML/CFT Compliance

The bank must comply with the Financial Crimes Act 2017 and relevant regulations and directives.