The Reserve Bank of Malawi (RBM) has established the Stabilisation Fund which aims at compensating victims of financial investments in licenced companies in the country.
Recently, there have been incidences of loss of money in licenced companies after the firms fail to make returns from their investments.
A recent example is where institutions and individuals lost billions of Kwacha invested in Alliance Capital Limited.
According to RBM spokesperson Ralph Tseka, the fund will be compensating investors who suffer pecuniary losses arising from failure of a licenced securities market player to meet its contractual obligations.
“The fund has been established as the Registrar of Financial Institutions was developing the necessary frameworks and structures for the securities market, including other logistical matters for the setup of the fund,” he said.
Currently, the law that governs the establishment stipulates that the main source of funding for the fund will be penalties levied from licenced securities market players for noncompliance.
Minister of Finance and Economic Affairs Sosten Gwengwe has since appointed the Stabilisation Fund Committee which consists of different players in the financial services sector.
Members of the committee include Mclewen Sikwese representing Bankers Association of Malawi, John Kamanga representing Malawi Stock Exchange, Salome Mdala representing Malawi Law Society, Chancellor Kaferapanjira representing Malawi Confederation of Chambers of Commerce and Industry and Chakudza Linje representing the Registrar of Financial Institutions.
Financial market analyst Bond Mtembezeka welcomed the idea, indicating that the economy is experiencing more swings and fluctuations, which translate to serious business risks.
He added that the fund will, therefore, instill confidence in investors and financial services stakeholders that whatever happens to their investment, their money will be recouped from the fund.
“For investors to have security, the fund has to be backed by a strong legal framework. A regulatory framework backed by the right legal instruments has to be in place,” he said.
Justin Mkweu is a fast growing reporter who currently works with Times Group on the business desk.
He is however flexible as he also writes about current affairs and national issues.