Guest of Honour's Speech at 2012 AGM Lilongwe Hotel

 

BY THE CHIEF EXAMINER
OF
RESERVE BANK OF MALAWI,
DUNCAN MPHANDE
AT THE
MALAWI MICROFINANCE NETWORK ANNUAL GENERAL MEETING

SUNBIRD LILONGWE HOTEL
LILONGWE, MALAWI

31ST AUGUST, 2012

 

The Chairman of the Board of the Malawi Microfinance Network, Mr. Joe Mononga;
The Executive Director of the Malawi Microfinance Network, Mr. Stewart Kondowe;
Chief Executive Officers of Microfinance Institutions present here;
Distinguished Guests; and
Ladies and Gentlemen

On behalf of my Director, Microfinance and Capital Markets Supervision, it gives me great honour and pleasure, this morning, to be with you at this Annual General Meeting. This meeting is important in several aspects. Firstly, it accords an opportunity to do a postmortem of what the microfinance industry has done and achieved in the past year. In this respect, the meeting will receive management and financial reports for the past financial year.

Secondly, the meeting will also plan for activities to be done this year. In this regard, it is pleasing to note the level and scope of representation at this meeting. I can see participants from the industry, government institutions, other key stakeholders, and the Reserve Bank. This shows serious commitment on the part of members to the Network activities.    

Before I go any further, allow me to state a brief history and mandate of the Malawi Microfinance Network. You may be aware that in September, 1997, a National Forum on Microfinance was held in Mangochi to identify impediments to the development of the microfinance industry. The identified impediments were: existence of microfinance programs with conflicting objectives; very high default levels; and, subsidized loan schemes that were clearly not sustainable. Other impediments included unclear roles and uncoordinated interventions by different donors and players; and unsustainable practices that hindered expansion of outreach of quality and affordable financial services.

In view of the foregoing, the Forum came up with a recommendation to form a Network. The Network was created to foster the adoption of best practices by industry players. In addition, the Network coordinates various interventions that aim to promote development of the Microfinance Industry.

Ladies and Gentlemen, allow me, at this point, to outline the achievements registered by the Network since its inception in October 2001. The Network has been a resource centre in terms of information about the microfinance industry. The Network has been collecting, analyzing and disseminating microfinance information for the benefit of the public. I must acknowledge here that the Reserve Bank is one of the beneficiaries of this information. It is on this account that the Reserve Bank would wish to urge all microfinance institutions to continue reporting to the Network. I should mention here that the reports should be timely, complete, and accurate.

In another development, the Network has been playing an important role in as far as advocacy and lobbying for enabling microfinance environment is concerned. This role, Ladies and Gentlemen, has borne fruits: the National Microfinance Policy, the Financial Inclusion Strategy, and the Microfinance Act, among others. The Network remains critical in the formulation of the policy and legislative documents. The Network has also played another pivotal role in building capacity of the industry through trainings. Members of staff from Network affiliates have attended various trainings in financial management, credit management, over the years. This is only to highlight but a few achievements.  

Ladies and gentlemen, you may be wondering why I belabor the achievements of the Network. It is because the achievements are an important aspect to achieving financial inclusion agenda in this country. It is on this account that the Reserve Bank considers the Network a strategic partner in achieving increased access to affordable financial services. Let me take this opportunity to mention that financial inclusion cannot be achieved if cases of abusive lending and loan collection are prevalent. In this regard, the Reserve Bank expects adoption of fair and best practices in pricing and loan collection in order to improve the image of the microfinance industry. The Reserve Bank will not tolerate any unfair practices in the microfinance industry.

Ladies and Gentlemen, the Reserve Bank is, however, aware that the above achievements did not come without challenges. The Network has been operating with limited financial and human resources. Resource mobilization remains a challenge to the Network. Membership remains limited too. I therefore urge the Network members to put heads together and identify sustainable sources of revenue. Only a well-resourced Network would guarantee sustainable service delivery to its members.

Ladies and Gentlemen, allow me at this point to mention the recent strides in financial sector reforms that have taken place in this country. The reforms have led to formulation and enactment of a number of legislations. But for purposes of this meeting, I wish to single out the Financial Services Act, Microfinance Act, and the Financial Cooperatives Act because of their relevance to you. This therefore means that the microfinance sector, cooperatives inclusive, falls under the supervision of the Reserve Bank.

The Reserve Bank does, however, recognize the daunting task of supervising the industry. There are about 20 microfinance institutions and 40 SACCOs in the industry, and more may be coming.  The Reserve Bank does not have the capacity to effectively supervise all these institutions. It is on this account that the Bank has delegated the supervision of some classes of microfinance institutions and SACCOs to the Network and MUSCCO, respectively. I therefore call upon all respective institutions to cooperate with the Network and MUSCCO in their capacity as self-regulatory authorities.

Distinguished Ladies and Gentlemen, the point I want to emphasize here is that of compliance with the law as well as best practices. All institutions shall be required to report to the Network, MUSCCO and the Reserve Bank. Please note that reporting is not optional. It is mandatory and any non-compliance attracts penalties. I therefore urge all of you to submit your reports promptly and avoid penalties.

Further to this, you may also be aware that the Reserve Bank licensed two credit reference bureaus namely, Credit Data and CRB Africa. It is also a requirement under the Credit Reference Bureau Act to report to the bureaus. However, appreciating capacity challenges, in terms of operating infrastructure, facing our MFIs and SACCOs, reporting for now is optional. But I take this opportunity to urge you all to start making necessary arrangements for mandatory reporting due to commence in the near future.     

Ladies and Gentlemen, you will also recall that some directives for Microcredit Agencies and Non-Deposit Taking Institutions were gazetted and became effective on 4th June, 2012. Copies of these directives were circulated to all market players.  I therefore urge all of you to keep abreast with these directives. I know the Reserve Bank has been requested to make a presentation on highlights of the directives to you. I hope the presentation will pit the requirements clear to you.

Let me conclude my remarks, Ladies and Gentlemen, by calling upon all of you to collectively come up with challenges that may arise from implementation of the laws. The meeting should propose collective measures to overcome the challenges as an industry.

My remarks would be incomplete if I do not express gratitude to the heads of all the microfinance institutions gathered here. I know the importance of the work you all do. This reflects commitment you have to the Network.

With these few remarks, I declare the meeting officially open. I thank you for your attention and may God bless the Network.