UN’s $4 million boost to Micro finance in Malawi

(from left) Michael Keating, UN Resident Coordinator/UNDP Resident Representative, Hon. Goodall Gondwe, Minister of Finance and Ms. Agnes Chimbiri, UNDP Head of MDGs Cluster during the signing ceremony.
CREDIT: NEWSpix Agency/2007

LILONGWE, 19 June 2007– The Government of Malawi and United Nations today sign a micro financing project that will contribute significantly towards poverty reduction by increasing access to financial services for poor and low-income population groups.

In Malawi, only 3% of the population has access to saving services while a marginal 1% access credit. Insurance services are virtually absent, and the percentage of poor families with access to any financial services in rural areas is even lower. 

United Nations Development Programme (UNDP) and United Nations Capital Development Fund (UNCDF) are each contributing USD 2 million to a USD 6 million basket-fund, which will run from 2007 – 2011.

Speaking at the signing ceremony, Malawi’s Minister of Finance, Hon. Goodall Gondwe said deepening the financial sector by providing credit facilities to more people especially poor and vulnerable communities can only be good news for the economy. He added that lack of access to credit is a major stumbling block in increasing production and this facility will enormously alleviate this problem and realize a meaningful change in the lives of many Malawians, especially women.

The project is a response to the growing demand for financial services including loans, savings, payment services, money transfers and insurance for poor and vulnerable people with priority given, to increasing access for rural communities, where the demand for these services is greatest. The project will increase the number of household savers by 50%, half of whom should be women.

Michael Keating, UN Resident Coordinator and UNDP Resident Representative said that the UN strongly advocates for micro financing as one of the best tools in alleviating poverty and accelerating achievement of the Millennium Development Goals. “The rural population accounts for over 80% of the population. People need to access credit to improve their standards of living, open businesses and to participate in and benefit from economic growth of this nation. Women in particular, will be targeted by initiative.”

The Financial Inclusion in Malawi (FIMA) project will focus on three areas: policies and nurturing dialogue among stakeholders, supporting innovation in financial markets that deepen and broaden access, and building the capacity of key institutions supporting micro, rural and agricultural finance.

The project aims to build an inclusive financial sector characterized by numerous micro-finance institutions that will provide innovative and varied financial services in a competitive environment and operating within a legal framework that is conducive for business accountability and development. Market innovations that increase the supply of savings services will be encouraged through a network of partnerships – nationally, regionally and internationally.

The project will be implemented by the Ministry of Finance and UNCDF and stakeholders include the Ministry of Finance, Ministry of Industry, Trade and Private Sector, Ministry of Agriculture, the Reserve Bank of Malawi, Malawi Microfinance Network and donors.

Some remarkable economic recovery is being realized in Malawi but its economic performance is still fragile due to high dependency on limited set of export crops and strong dependency on foreign aids inflow. Many donors are actively supporting the government implement the Malawi Growth Development Strategy (MGDS) in the areas of education, water development and energy.

Malawi’s financial sector, which is dominated by large banks, lacks micro financing institutions for smallholder farmers - whose production of maize and tobacco make up the bulk of the country’s supply of staple foods and contribute to the majority of the country’s export earnings - and potential entrepreneurs in the rural areas with no savings facilities or collateral for loans.

For information, please contact:
Bill Chanza on + 265 (0) 1 773 500; +265 8 352616 or bill.chanza@undp.org
Susan Muguro on +265 (0)9 967-991 or susan.muguro@undp.org

ABOUT UNDP: The United Nations Development Programme (UNDP) is the UN’s global development network, advocating for change and connecting countries to knowledge, experience and resources to help people build a better life.

In Malawi, UNDP sees its roles as supporting the Government to use development resources effectively and accountably to achieve the objectives of the Malawi Growth and Development Strategy and attain the Millennium Development Goals.

Further information can be found at www.undp.org.mw