Islamic Microfinance in Malawi
Reserve Bank of Malawi is the central bank for the government of Malawi.[1] There are about nine commercial banks is Malawi[2] The banks that registers more banking deposits include; National Bank of Malawi, Standard Bank Malawiand First Merchant Bank.[3] The Reserve bank has the Microfinance and Capital Markets Supervision department that regulates and supervise microfinance inclusive financial cooperatives and capital markets financial institutions.[4]
Islamic Banking or finances are the banking activities that are in line with Islamic teachings (Shariah); hence; the development of Islamic economies.[5] Islamic finance does not allow interest (riba) and equity, moral and ethical values are promoted. Members are encouraged to venture into businesses that are in line with Islamic teachings. For instance; Islam does not allow its members to sell or drink beer; hence this kind of business it not allowed under Islamic finance.
Islamic banking in Malawi
Islam in Malawi has membership of about 13% of Malawi population (about 2.2 million people). In 2013, President of Malawi; Joyce Banda asked the Muslims to take a leading role in establishment of Islamic banks. The Reserve Bank on Malawi approved the operation of Islamic banking in 2017. Since that time, the Muslim Association of Malawi (MAM) has been engaging specialist in Islamic finance to train local bank officials and other stakeholder on Islamic banking.[6]
Islamic Microfinance in Village Savings and Loans (VSL) groups
Village Savings and Loans is one risk management strategy for rural poor households. It promotes the saving culture among the poor households that normally live very far from the formal banks. The other challenge is that formal banks charge high interest on loans; hence; making it difficult for poor households to pay back the loan. Formal banks in Malawi charge 31.64% interest rate while most Village Savings and Loans groups charge interest in the range of 10% to 40% but majority charge 20%. Most Village Savings and Loans groups in Malawi do not follow the Islamic finance system; hence making difficult it for some Muslims to participate in Village Savings and Loans groups.[7]
Islamic microfinance products[8]
There are different products that Islamic microfinance offers. Some of the products include:
- Takaful
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- ↑ "Reserve Bank of Malawi".
- ↑ "List of Banks in Malawi".
- ↑ "Malawi-Banking Systems".
- ↑ "Reserve bank of Malawi:Micro-Finance & Capital Markets Supervision".
- ↑ "Islamic Banking and Finance".
- ↑ "Malawi approves Islamic Banking, Shariah- Compliant services".
- ↑ "Microfinance in brief".
- ↑ "Microfinance in Brief".
