Microfinance Focus, November 11, 2011: In September last year, Reserve Bank of Malawi introduced a new Malawi Microfinance Bill which requires all microfinance institutions (MFIs) in Malawi to disclose their pricing including nominal rate of interest, commissions and fees.

According to a MFTransparency paper ‘Reserve Bank of Malawi on Pricing Disclosure’, the new pricing disclosure policy in the Malawi Microfinance Bill is a very ambitious step for a nascent market.

The Reserve Bank of Malawi (RBM) has made a concerted effort to involve a range of different stakeholder groups in the process of developing this new policy which is an essential component to implementing new policy.

RBM’s decision to partner with the network MAMN will be a critical factor in the success of this policy. The local MFI network in a given country tends to have the most detailed knowledge of the day to day operations of the market and understanding of the needs and capabilities of their members.

Moreover, RBM has established a consumer education unit to educate the masses on financial services and the need for clients to know full terms and conditions of financial services and products. The consumer education unit will also receive and resolve complaints between service providers and customers.

MFTransparency believes that pairing disclosure requirements with education and training is another important step as transparency is only valuable if market players are informed, understand the information presented to them and therefore able to make effective use of the data available.

One of the main challenges MFTransparency anticipates is that the RBM will face in implementing this policy is resource and capacity constraints on the part of MFIs in terms of ability to comply. The Malawian microfinance market is still in a relatively early stage of development.

Extensive technical assistance and training are needed not only to ensure effective implementation of the new Microfinance Bill but also the sustainable growth of the industry in general.