MicroLoan Foundation Malawi is a social microfinance institution established in 2002 that is dedicated to reducing poverty in Malawi. MicroLoan Malawi serves women in rural areas through a range of products targeting agriculture and small enterprise.

Headquartered in Lilongwe, the organization provides agricultural loans and business starter loans through a group lending model, lending to groups of five women. Additionally, MicroLoan Malawi provides extensive training to cover business, financial, and technical knowledge before issuing loans and throughout the loan cycle.

A unique lending approach:

MicroLoan Malawi provides two types of loans to impoverished women:

     • Agricultural loans target farmers that are committed to investing in sustainable farming and producing commercially viable cash crops.

     • Business starter loans provide women living below the poverty line of $2.50/day with start-up capital for small businesses.

MicroLoan gives women living in poverty the opportunity to kickstart their own income-generating activities by providing small loans, training, and ongoing business support. Field Officers travel long distances into rural communities to meet with groups of women to deliver training and oversee repayments. Focusing their operations in rural areas means that MicroLoan reaches women with little access to finance, therefore the most in need of their pro-poor financial services. Before accessing a loan, the loan group completes seven training modules to develop their financial literacy skills. Delivered through song, dance, and role play, the training methodology is specifically designed for rural women with low levels of literacy and education. Each group of five women has a collective responsibility for their loan repayments. Learning together ensures they can support each other both socially and financially.

With Kiva’s support, the organization will scale some of its already existing loan products to a more significant portion of its portfolio. Additionally, Kiva funding will allow the organization to provide loans with a lower interest rates.

A Note on MLF Malawi’s Portfolio Yield:

We care deeply about the cost that Kiva borrowers pay for their loans, which is why fair pricing is a core part of our initial due diligence process for Lending Partners. With Kiva's 0% capital, many of our Lending Partners are also able to add additional value to their loans by reducing interest rates, offering non-financial services or creating new loan products.

For partners with reported portfolio yields or average APRs higher than 50%, Kiva takes steps to check that the high rates are justified by the impact of the loans. Kiva also verifies that the partner is not generating unreasonable profits or paying inflated salaries, and that the partner’s elevated operating costs are justified by its operating environment and/or the design of its loan products.

We seek to support loans that don’t impose an unjustifiable cost burden on hard-working borrowers. We nevertheless recognize that in order to reach vulnerable and excluded people with high-impact products and services, some of our partners incur high costs that necessitate charging higher-than-average costs to borrowers in order to allow for sustainability and scale. With this partner, Kiva capital is supporting a loan product that costs less than the partner's typical products.

• Factors that drive up the costs that this partner organization charges its borrowers include:They operate in a market with high inflation, which means that the rates you see on Kiva are overstated, since loans are given in local currency, which lost value much more quickly than the U.S. dollar.
• They provide very small loans. This leads to higher operating costs, since providing each individual loan presents a minimum per-unit cost.
• They provide very short term loans, which leads to higher operating costs, since each short-term loan generates a smaller amount of revenue than a longer-term loan.
• They provide more than just cash to many of their borrowers, including costly wraparound services such as healthcare, financial or business training, agricultural extension services, insurance or access to education.
• They work in areas with very poor infrastructure, such as limited roads. This increases the costs of finding clients and maintaining branch offices.
• They’re based in an area with a high cost of living and doing business. This is often due to the high demand and low supply of adequate housing and goods.
• They’re a small company or organization that hasn’t yet achieved the scale and efficiency necessary to reach sustainability and reduce pricing, but the impact of their services merits the opportunity to prove their business model.
• They pay high interest rates on the loans they take from banks and other funders, given the market in which they operate. This means they need more support from innovative sources like Kiva to reduce costs and pass savings on to borrowers.
• They work extensively in rural areas, which requires their employees to engage in costly travel to find and serve their clients.
• They operate in a region known to be at risk of natural disaster, which increases the cost of doing business.
• They operate in an area with a limited or poorly functioning banking system. This makes it difficult to access funding locally, and makes it more challenging to send and receive payments on loans from outside the country.

Termination of Kiva's Partnership:

Kiva and Microloan Foundation (MLF) in Malawi have agreed to end their partnership after nearly 10 years and more than $4.1M in loans raised. This is due to the challenges the partner has been facing in accessing US dollars from the local market in order to make repayments to Kiva. Since 2021, Malawi has been experiencing a shortage of foreign currency attributed to a decline in the country’s major exports. This partner has repaid its outstanding balance to Kiva in full, and these funds have been distributed to lenders. We thank Microloan Foundation (MLF) Malawi for the years of collaboration and wish them success in their future endeavors.