Reserve Bank of Malawi

Information for Malawian Diaspora

Introduction

The Reserve Bank of Malawi (the RBM) is charged with the administration of exchange controls. This is done by regulating the inflow and outflow of foreign exchange resources over the country's borders with the aim of maintaining a stable currency. The RBM draws its mandate from the Exchange Control Act. As administrators of exchange controls, the RBM ensures that the country's foreign exchange resources are utilized in a prudent and productive manner in order to maintain non-volatile exchange rates and low inflation as well as promote a sound and stable financial system. The current account is fully liberalised, however the capital and financial account is still controlled. The RBM has initiated the process of liberalising the capital and financial account by vetting remittances relating to registered loans and investment be done by commercial banks. These include dividends/profits, loan repayment plus interest and repatriation of capital on investment.

Initiatives in Implemented for the Benefit of the Diaspora

The RBM recognises the important role that the Diaspora play to the economy of Malawi and has therefore implemented a number of initiatives aimed at encouraging the Diaspora to invest and keep their savings in Malawi and these include:

Non-Resident Foreign Currency Denominated Account (FCDA)
Non-resident FCDAs are those FCDAs that are held by among others, the Diplomatic Community and International Organizations. Non-resident FCDAs became operational in 2006. Malawians living abroad are free to open Non-Resident FCDAs with any Bank in Malawi. The following are conditions for operation of the accounts: 

Remittances from these FCDAs are not subject to Exchange Control requirements including the following provisions:

  • FCDAs can be credited with remittances through normal banking channel and other internationallly acceptable payment instruments
  • Account balances may be converted into Malawi Kwacha
  • There are no restriction period over which account balances may be retained

Most of the diaspora would like to withdraw foreign currency cash from their FCDAs when they visit Malawi. This is not allowed, however, the Diaspora are permitted to withdraw cash foreign currency from their FCDAs when they are travelling back to their country of residence

To allow the Diaspora flexibility of shopping for best exchange rate for their FCDA balances or the funds they send from offshore accounts, licensed foreign exchange bureaux are allowed to buy foreign exchange from the diaspora through direct telegraphic transfers into the bureaus’ FCDA for immediate delivery of the Kwacha equivalent to the seller or their benefactor.

Opportunities in the Financial Sector

The Diaspora can invest in Malawi in the following products: :

  1. Treasury Bills
    • Malawi Treasury Bills (T-bills) are short term debt obligations to the Government with maturity of less than one year. The money is lent to Government through Reserve Bank of Malawi as its agent.
    • Treasury Bills fall in maturity periods (tenors) of 91, 182 and 364 days.
    • T-bills are issued (sold) at a discount, meaning that the investor pays less than the amount applied for as indicated on the bid form. For example, if an investor indicates/applies for K1.00 million on the bid form, they can pay (lend government) K950,000.00. At maturity, before taxes, they get K1.00 million kwacha.
    • The difference between what was paid and what an investor gets on maturity (K50,000.00 on the above example) is the discount/interest earned on the investment.
    • Resident or non-resident and/or corporate bodies who hold an account with a local commercial bank in Malawi can invest in Treasury Bills (T-bills) by filling the bid form obtained from the website and submitting them to their local correspondent bank using the contact details behind the bid form.
    • Upon being successful, an electronic confirmation letter is sent to the lender via email advising of the amount to be debited and the date of settlement. Funds are then debited/deducted from their local account on settlement date.
    • Previously a physical certificate was issued but currently electronic certificates are issued and kept in the Central Depository system (CSD).
    • A withholding tax, currently at 20%, is deducted from any interest amount earned.
    • The minimum investment amount for T-bills is K10,000.00 (Ten Thousand Kwacha) and multiples of K1,000 thereof.
    • T-bill bidding is free and there are two options: Competitive bidding where a desired yield is indicated on the bid; and Non-competitive bidding where the investor is awarded the average yield of successful bids for that tenor.
    • Noncompetitive bidding is only open to individual investors and not to entities such as corporates and other organizations. The latter are assumed to have pricing expertise and this also helps pricing discovery for the securities.
    • The maximum amount for Non-competitive bids is currently K10,000,000.00 per tenor per auction. Competitive bidding has no maximum limit.
    • T-bills Bid form can be collected from any branch of the Reserve Bank of Malawi or can be downloaded from Reserve Bank website: https://www.rbm.mw/FinancialMarkets/TreasuryBills/
    • Separate bid forms should be completed for each maturity period being applied for.
    • Non-resident individuals and/or corporate bodies who do not have an account with a local commercial bank may invest in treasury bills through a nominee of a commercial bank or investment bank or a broker in Malawi.
  2. Treasury Notes
    • Treasury notes (T-notes) are long term debt obligation of the Malawi Government with maturity of more than one year. They fall in maturity periods of 2, 3, 4 and 5 years
    • T-notes provide a periodical interest payment (coupon) for the period they run.
    • T-notes are also sold at a discount (as explained on T-bills) or issued at par. Issued at par means for example one lends K1.00 million to government and gets back K1.00 million on maturity and benefits from the periodic interest payments e.g. receiving interest every 6 months for 5 years.
    • For those issued at discount, the investor earns the discount and the periodic interest payments.
    • The minimum investment amount for Treasury Notes is K1,000,000 (One Million Kwacha) and multiples of K100,000 thereof.
    • Procedures to invest in Treasury notes are similar to those of Treasury Bills.

    Contacts
    Director, Financial Markets
    Reserve Bank of Malawi
    Box 30063,
    Capital City,
    Lilongwe 3, Malawi
    Tel:  (265) (0) 1 770 600/1 771 600
    Website:  https://www.rbm.mw/
  3. Money Transfer Business Operations (MTOs)
    • Investors intending to apply for money transfer operator license must be or must form a limited liability company.
    • There is no prescribed minimum capital requirement, but applicants must pay the following:
      • Non-refundable application fee of K100,000
      • License fee at K150,000 per annum.
    • MTO License is valid for three years.
    • Exclusivity clauses in money transfer agency agreements were abolished.
  4. Foreign Exchange Bureau Business
    • Investors intending to apply for foreign exchange bureau must form a limited liability company.
    • The minimum capital requirement for a foreign exchange bureau business is K7.00 million
    • Applicants must pay:
      • Non-refundable application fee of K250,000.
      • License fee at K350,000 per annum.
    • Foreign exchange bureau license is valid for three years.

    Contacts
    Director, Financial Markets
    Reserve Bank of Malawi
    Box 30063,
    Capital City,
    Lilongwe 3, Malawi
    Tel:  (265) (0) 1 770 600/1 771 600
    Website:  https://www.rbm.mw/
  5. Banking and Other Financial Institutions Business Operations
    • Minimum capital requirement for a banking license is US$5.00 million.
    • Application fee for a banking license is US$500.00.
    • Minimum capital requirement for other financial institutions is US$1.5 million.
    • Detailed guidelines can be downloaded from the Reserve Bank website: https://www.rbm.mw/

    Contacts
    Director Bank Supervision
    Reserve Bank of Malawi
    P.O. Box 565,
    Blantyre, Malawi
    Tel:  (265) (0) 1 820 299
    Website:  https://www.rbm.mw/
  6. Malawi Stock Exchange (MSE)
    • A stock exchange is a platform where listed companies can raise long-term capital by issuing shares and other securities to the investing public and investor can buy and sell shares and other securities e.g. bonds and T-notes.
    • Resident or non-resident individuals and/or corporate bodies (including the Malawian Diaspora) can participate on the Malawi Stock Exchange.
    • To participate on MSE, one is required to open an account with any of the MSE-member stockbrokers.
    • Currently there are three MSE-member stockbrokers i.e. Stockbrokers Malawi Limited, Continental Capital Limited and African Alliance.
    • Contact details for the stockbrokers can be obtained on the MSE website: www.stockbrokersmalawi.com
    • Stock Prices rise and fall depending on many factors including economic environment, company performance and market developments. Like other financial assets, there is always a risk associated with investing in shares.

    Contacts
    The Chief Executive Officer
    Malawi Stock Exchange
    14 Victoria Avenue,
    Private Bag 270
    Blantyre, Malawi
    Tel:  (265) (0) 1 823 620
  7. Foreign Investment Registration Procedure
    • The diaspora can bring investment into the country either directly into a registered business or through portfolio participation i.e. on the stock exchange.
    • Investment can come in through funds transfer, stocks, technology and equipment.
    • This investment is treated as foreign investment i.e. both dividends and capital can be repatriated back to the diasporas offshore accounts.
    • The Diaspora can also lend to residents on commercial terms, repayable to the Diaspora account of choice

Initiatives in the Pipeline

Reserve Bank of Malawi

  1. Streamlining the regulations for money transfer operators to ease entry and operation of money transfer business;
  2. Advancing formal and informal remittance statistical compilation methods to enhance policy reform process;
  3. Establishing a diaspora bond to finance public infrastructure;
  4. Facilitate the introduction of more investment opportunities to the diaspora such as property acquisition/construction, money transfer business.
  5. The RBM intends to engage financial institutions to come up with financial products to support diaspora needs.

Export Development Fund

  1. EDF is an offshoot institution of the central bank that was established to foster development specifically focusing on building the country’s export capacity.
  2. EDF intends to engage the Diaspora who are capable of dealing in commodity trade and other products to create demand for Malawian products and buy the same from Malawi for resale in the countries where they are living and elsewhere.
  3. EDF is in the process of identifying some already established commercial entities that are critical to export delivery and foreign exchange generation in Malawi but are financially distressed as possible targets for acquisition by diaspora and other investors.
  4. In order to fill the gap where demand for developmental projects is high but risk is also high, EDF is provides project preparation services for developing and de-risking infrastructure projects and deliver their concepts to bankability.
  5. More details can be found at www.edf.mw
Contacts
Marketing Officer
Export Development Fund
Pamdozi House, Presidential Way
Box 30063,
Capital City,
Lilongwe 3, Malawi
Tel:  (265) (0) 999 939 197

Contacts

For more information contact:

The Director, Foreign Flows Monitoring Department
Reserve Bank of Malawi
Box 30063,
Capital City,
Lilongwe 3, Malawi
Tel:  (265) (0) 1 770 600/1 771 600
Fax:  (265) (0) 1 772 752 /1 774 289