The Reserve Bank of Malawi (the RBM) is charged with the administration of exchange controls. This is done by regulating the inflow and outflow of foreign exchange resources over the country's borders with the aim of maintaining a stable currency. The RBM draws its mandate from the Exchange Control Act. As administrators of exchange controls, the RBM ensures that the country's foreign exchange resources are utilized in a prudent and productive manner in order to maintain non-volatile exchange rates and low inflation as well as promote a sound and stable financial system.
The current account is fully liberalised, however the capital and financial account is still controlled. The RBM has initiated the process of liberalising the capital and financial account by letting Commercial Banks to handle remittances relating to registered loans and investment. These include dividends/profits, loan repayment plus interest and repatriation of capital on investment.
INITIATIVES IMPLEMENTED FOR THE BENEFIT OF THE DIASPORA
The RBM recognises the important role that the Diaspora play to the economy of Malawi and has therefore implemented a number of initiatives aimed at encouraging the Diaspora to invest and keep their savings in Malawi and these include:
(a)Non-Resident Foreign Currency Denominated Account (FCDA)
Non-resident FCDAs are those FCDAs that are held by Malawians living abroad (the Diaspora), the Diplomatic Community and International Organizations. Non-resident FCDAs became operational in 2006. The following are conditions for operation of the accounts:
- · Remittances from these FCDAs are not subject to Exchange Control operators to enter the market.
- · Withdraw of Foreign Currency Cash from FCDAs is not allowed when visiting Malawi, however when travelling back to ones country of residence, the Diaspora are allowed to withdraw Foreign Currency Cash.
Through this initiative the cost of sending or receiving money in Malawi has reduced substantially compared to the previous means of transferring money, such as MoneyGram, which was among the only providers of the service.
(b) Diaspora Investment
The Diaspora can invest in Malawi in form of cash, trading stocks/inventory, technology and/or capital equipment. The Diaspora can also participate on the local stock exchange and other portfolio investments including government instruments i.e. Treasury Bills.
The Bank encourages resident companies to procure affordable loans from offshore financiers. The Diaspora can lend to resident companies as individuals or pool resources together for onward lending to resident companies. Diaspora participation in any capital transactions will be granted special treatment such as remittance of dividends and repatriation of capital upon disinvestment.
INITIATIVES IN THE PIPELINE
(a) Streamlining the regulations for money transfer operators to ease entry and operation of money transfer business;
(b) Advancing formal and informal remittance statistical compilation methods to enhance policy reform process;
(c) Establishing a diaspora bond to finance public infrastructure;
(d) Facilitate the introduction of more investment opportunities to the diaspora such as property acquisition/construction, money transfer business.
(e) The RBM intends to engage financial institutions to come up with financial products to support diaspora needs.
For more details please read the following document
The Director, Foreign Flows Monitoring
Reserve Bank of Malawi
Lilongwe 3, Malawi
Tel: (265) (0) 1 770 600/1 771 600
Fax: (265) (0) 1 772 752 /1 774 289
For more details visit www.rbm.mw/MediaCenter/DiasporaMalawi