MicroLoan Foundation Malawi

What is MLF-M’s mission?

The aim of MLF-M’s is to ‘reduce poverty and inequality in Malawi by providing business loans, training, and mentoring to impoverished women in rural areas’.

What types of financial services does MLF-M provide?

Primarily MLF-M offers short-term loans for productive ventures accompanied by a strong training component. Most borrowers live in relatively isolated rural areas. It does require borrowers to deposit 10% of the loan amount on the first loan cycle, and 20% on later cycles as savings and these are held with a third party commercial bank. Savings cannot be accessed until the loan is repaid in full, but the savings do attract interest of between 8-20% per annum depending upon the length of time funds remain in the bank.

How much interest does MLF-M charge?

Microfinance institutions (MFIs) charge higher rates of interest for several reasons. Firstly, the administrative costs of making many small loans are much higher than making fewer larger loans; secondly, they take more time assessing the feasibility of applications and thereby reducing risk because borrowers cannot offer traditional forms of collateral nor do they have salaried incomes; thirdly MFIs often operate in geographically remote areas with low population densities and this means that they incur greater operational costs; and fourthly they often accompany loans with a range of training and technical advice. In addition, inflation is generally higher than in countries such as the UK.

The most representative loan product of MLF-M funded by Lendwithcare attracts an Annual Percentage Rate (APR)* of 74.62%.

*The Annual Percentage Rate (APR) is a standard way of expressing the cost of a loan that allows for comparison between loans. It includes annual interest, insurance, and fees that the borrower must pay, and is expressed as a percentage of the amount borrowed.

Does MLF-M provide any training?

Yes, MLF-M does provide extensive training for borrowers, often as frequently as every two weeks in their villages. Prior to disbursing the loan, training is in the following areas:

• Products, procedures, interest rates and savings
• Loan application and disbursement
• Constitution planning or drafting
• Leadership and responsibilities
• Avoiding delinquency
• Rights and responsibilities

After receiving the loan, training continues in the following areas:

• Group support and what happens when things go wrong
• Setting savings goals
• Market research
• Costs, profits and pricing
• Doing a business plan
• Appropriate loan sizes
• Revision of constitution and loan application

Furthermore, MLF-M also provides free agricultural extension to local farmers in the cultivation of maize in order to improve yields, covering issues such as how far apart to space seeds, how to prepare land and how to apply fertiliser. The training is undertaken on the borrowers’ actual plots of land and loan officers do visit to check compliance throughout the growing season.

Where can I find out more information about MLF-M?

Further information about the MicroLoan Foundation is available from the organisation's website here.

*PAR30 is a commonly used metric that provides an insight into the quality of an MFI's loan portfolio, which is generally its major asset and therefore its greatest source of risk. It is computed by dividing the amount of delinquent loans greater than 30 days over the total amount of the loan portfolio.

Sources: *World Bank 2021 **United Nations Development Programme 2021 ***Sustainable Development Report 2022