Rural Financial Services Project: Mudzi Financial Services Sub-project

Rural Financial Services Project: Mudzi Financial Services Sub-project

IFAD and the International Development Association (IDA) jointly supported the Smallholder Agricultural Credit Project, which was seen as a logical step in the development of rural banking institutions in Malawi. But a step further was required to meet the needs of rural poor people who were excluded from credit. That step led to the Rural Financial Services Project (RFSP), financed by IDA, and to the Mudzi Financial Services Sub-Project, supported by IFAD.

While the RFSP provided a broad coverage of financial services, the Mudzi sub-project specifically provided credit and savings facilities for resource-poor people who did not have access to other formal financial institutions. The model was the Grameen Bank operations.

The RFSP supported the transformation of a smallholder credit scheme, the Smallholder Agricultural Credit Administration (SACA), into the Malawi Rural Finance Company (MRFC) a limited liability company in which government and the private sector, including farmers’ clubs, were shareholders. This was the first phase of a two-phase programme to transform the SACA into a rural bank.

The sub-project included support for:

• pre-lending activities, such as promoting formation of groups of poor households
• a credit facility to enable MRFC to provide credit to members of groups
• a pilot programme to develop new instruments for savings

Source: IFAD