Malawi - Banking and securities

The Reserve Bank of Malawi was established in Blantyre in 1964. It took over, by stages, the functions in Malawi of the former Bank of Rhodesia and Nyasaland until that bank wound up its affairs in June 1965. The main duties of the Reserve Bank are to maintain currency stability and to act as banker to the government and to the commercial banks. The Reserve Bank administers exchange control and acts as registrar for local registered stock. The Reserve Bank also handles the issue of treasury bills on behalf of the government.

Malawi's financial services are unsophisticated and basic. Aside from the central bank; there are five licensed commercial banks, which are dominated by the two government-owned banks, the National Bank of Malawi and the Commercial Bank of Malawi. In 1999, the NBM was 48% owned by Press Corporation Limited (PCL), and 39% by ADMARC; CBM was 23% owned by PCL, 22% by the Malawi government in direct shareholding, and 17% by the Malawi Development Corporation. The Malawi government owns MDC, ADMARC, and is PCL's largest shareholder (49%). As of 31 March 1999, total assets of the five banks reached about $300 million. The other three commercial banks are the First Merchant Bank Limited, the Finance Bank of Malawi, and Indefinance.

The Investment and Development Bank of Malawi (Indebank), formed in 1972 with foreign and local participation, provides medium- and long-term credit. Although the country's financial market has been liberalized, the sole mortgage finance institution, the New Building Society (NBS), which came into operation at independence in March 1964, faces no competition. The New Building Society's assets stood at $244.5 million in 1995.

A subsidiary of Indebank, the Investment and Development Fund (Indefund), finances small and medium-sized enterprises. The Malawi Development Corporation (MDC), which services the needs of large-scale industry, is state-owned. The Post Office Savings Bank (POSB) was restructured in 1994 and licensed as a commercial bank, the Malawi Savings Bank (MSB). Other major financial institutions include Loita Investment Bank, the Leasing and Financing Co. of Malawi (LFC), the Malawi Rural Finance Company (MRFC), and the Finance Corporation of Malawi (FINCOM).

The International Monetary Fund reports that in 2001, currency and demand deposits—an aggregate commonly known as M1—were equal to $136.1 million. In that same year, M2—an aggregate equal to M1 plus savings deposits, small time deposits, and money market mutual funds—was $268.3 million. The discount rate, the interest rate at which the central bank lends to financial institutions in the short term, was 46.8%.

The Malawi Stock Exchange (MSE) was established in December 1994 along with Stockbrokers Malawi to deal with listed company shares and to act as a broker in government and other securities approved by the Reserve Bank of Malawi (RBM). The stock exchange had no listings until November 1996, when shares in NICO were put up for sale. Since November 1994, the RBM has marketed Treasury bills of varying maturities (30, 61, 91, and 182 days) in an attempt to encourage greater participation by the private sector.