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Country Commercial Guides for FY 2000: Malawi Report prepared by U.S. Embassy Lilongwe, released July 1999    Note*

CHAPTER VIII. Trade and Project Financing

Description of the Banking System

94. Paragraph 76 describes the banking sector in Malawi. Malawi neither has nor requires depositor insurance, but the RBM enforces strict safeguards and capital requirements. The RBM has strict reporting guidelines on capital adequacy, liquidity ratio, etc. International accounting standards adopted by the Society of Accountants in Malawi (SOCAM) apply to banks. Bank financial statements are in compliance with these standards, and are audited by internationally recognized firms including KPMG Peat Marwick, and Deloitte & Touche. In March 1999, net credit from the banking system to the public sector was negative MK 1259.2 million (approx. USD 28.7 million). Gross credit to the private sector totaled MK 3249.4 million (approx. USD 74 million).

Foreign Exchange Controls Affecting Trade

95. In February of 1994, the Government of Malawi eliminated exchange controls on Current Account transactions (the capital account is still controlled) and introduced a market-based exchange rate system. Importers do not need to obtain RBM approval to place international orders or to pay for imports. Malawi residents and corporations earning foreign exchange "on a regular basis" are allowed to open foreign-currency-denominated accounts with authorized banks. During periods of scarcity investors may not have immediate access to foreign exchange. Foreign exchange is plentiful from April through September (when tobacco sales generate foreign exchange inflows), and scarce from October through March. Hard-currency Balance of Payment assistance inflows from donor countries also affect the availability of foreign exchange.

General Financing Availability

96. Kwacha-denominated financing is available from Malawi's commercial institutions. Credit is allocated on market terms, and foreign investors are eligible to apply for it. Proceeds from any investment using local resources, however, are not remittable.

97. Local financing for hard-currency-denominated transactions can be problematic, i.e., during shortages of foreign exchange. Imports into Malawi are financed primarily through secured letters of credit.

Export Financing and Insurance

98. OPIC has an investment guarantee agreement with Malawi In April 1999 the U.S. Export-Import Bank (Ex-Im Bank) announced its decision to make available short-term export-finance insurance to Malawi under a new Africa Pilot Program. Malawi remains off-cover for most other Ex-Im bank programs.

Project Financing Available

99. The World Bank, through its International Development Agency (IDA), is Malawi's most consistent international source of financing for public projects. The African Development Bank (AFDB) and its affiliated Fund are another major source of project financing. The U.S. Agency for International Development (USAID), the World Bank, and the African Development Bank/Fund are the major donors for projects in which U.S. firms are eligible to participate. Several local financial institutions including INDEBANK have lines of credit from both regional and multilateral organizations for lending to domestic investors in need of foreign exchange.

Malawi Banks and Corresponding U.S.-Based Banking Arrangements

100. National Bank of Malawi (NBM) - maintains banking relationships with Barclays Bank, Citibank, Standard Chartered, Chase Manhattan, Bank of New York, and Equator Bank. Banking services include demand deposit accounts, telegraphic transfers, and travelers' checks.

101. Commercial Bank of Malawi (CBM) - maintains banking relationships with Citibank, Chemical Bank, Bank of New York, Bank of America, and Equator Bank. Banking services include demand deposit accounts, telegraphic transfers, and Citibank travelers' checks.

102. Finance Corporation of Malawi (FINCOM) - maintains banking relationships with Citibank and Equator Bank. Banking services include demand deposit accounts and telegraphic transfers.

103. Investment and Development Bank of Malawi (INDEBANK) -- maintains a banking relationship with Citibank. Banking services include demand deposit accounts, telegraphic transfers, and travelers' checks.

104. First Merchant Bank (FMB) - maintains banking relationships with Citibank and American Express. Banking services include demand deposit accounts and telegraphic transfers.

105. Finance Bank of Malawi (FBM) - maintains a banking relationships with Citibank. Banking services include demand deposit accounts, telegraphic transfers, and Citibank travelers' checks.