Financial Cooperatives Act

This provision gives the Act its short title: the Financial Cooperatives Act.

This section defines key terms used in the Act.

This section says the Act applies, alongside two other Acts, to persons providing member-based savings and credit services, unless the Registrar exempts them.

A person may not run SACCO deposit-taking, lending, or other financial services business unless incorporated under the Cooperative Societies Act and licensed under the Financial Services Act as a primary or secondary SACCO.

A licence applicant must submit a written application in the prescribed form, include any information the Registrar specifies, and attach the fee the Registrar specifies.

When deciding on a licence application, the Registrar must consider listed factors, and a primary SACCO must submit a complete licence application to the Registrar.

The Registrar must decide a completed licence application within 60 days, notify the applicant in writing, and give reasons if refusing. An aggrieved person may appeal to the Appeals Committee within 30 days, and the Committee may reverse the decision or set further licence requirements.

The Registrar may put conditions on a licence and later add, change, or replace those conditions.

A licence must not be transferred, assigned, or encumbered in any way.

A licence expires automatically if the licensee does not start the business within one year after the licence is granted.

The Registrar may suspend or revoke a licensed SACCO’s licence in specified cases, and a suspended or revoked SACCO must stop providing financial services immediately.

Revoking a licence does not cancel obligations already incurred during the licence period, and it does not stop a cooperative society from carrying on cooperative business under the Cooperative Societies Act.

Most persons may not use SACCO-related names or hold themselves out as a SACCO, and they may not use a confusingly similar name.

The Registrar may set minimum premises standards for a SACCO, inspect the premises for compliance, and issue a premises certificate if the premises comply. A SACCO must not do any business other than what is listed in its premises certificate.

A SACCO must conduct business at the place named in its premises certificate, and must apply to the Registrar before relocating that business place.

The Registrar must create and maintain the SACCO Register, record all licensees and their licences, and make the register or a copy available for public inspection during working hours.

The Registrar must publish the list of all licensed SACCOs every year in at least one electronic or print media with national circulation.

Register entries and Registrar-certified copies can be used as prima facie evidence about licensing-status facts and the Register’s contents.

Primary SACCOs may provide member financial services and may offer additional services, subject to Act, licence, asset, and Registrar-related limits.

Secondary SACCOs may provide specified services, join national payments systems, and offer insurance services with prior written approval from the Registrar.

Directors generally cannot serve more than three years per term, and they can serve only two consecutive terms before sitting out one full term; the Registrar may set directors’ responsibilities and qualifications.

SACCO management must prudently oversee the SACCO’s operations. The Registrar may issue directives setting responsibilities and qualifications for officers in management.

Employees of a SACCO cannot serve as directors, except that the chief executive officer may do so.

Fees, expenses, compensation, or reimbursements paid to a director of a SACCO must be disclosed to SACCO members at the annual general meeting.

A SACCO must maintain internal control systems at all times.

The Registrar must set minimum capital for SACCOs and may set ongoing capital requirements for individual SACCOs when supervisory review shows risks needing extra capital.

A SACCO must keep a minimum level of liquid assets, as prescribed by the Registrar, and must calculate its average period balance of deposits and borrowings for submission to the Registrar on a prescribed day.

The Registrar may set SACCO standards and take supervisory action if a SACCO breaches this section. Directors or managers who do not act reasonably to comply with subsection (1) may face administrative penalties.

A SACCO may invest unused funds in specified investments, but must stay within Registrar-prescribed limits and cannot buy land unless it is reasonably necessary for its business and within prescribed asset limits.

A licensed SACCO may lend to employees and board members, but only within a limit set by the Registrar, and insiders must avoid preferential treatment, guarantor roles, and conflicted participation.

A SACCO must keep a first charge over a member’s shares, deposits, dividends, or interest for debts owed to the SACCO, and may refuse withdrawals from a member’s deposit account if the member is in arrears.

After three years of holding dormant SACCO member funds, the Registrar must decide how those funds are to be treated.

A SACCO may not grant or keep outstanding certain credit facilities to members unless the Registrar has given prior approval.

SACCO members may not hold more than 10% of ownership shares or deposits without the Registrar’s approval.

A SACCO must conduct business with integrity, prudence, and professional skill, focus on sustainability for members’ financial services, and use only bona fide transactions.

A SACCO must always disclose the cost of borrowing in writing to the borrower, including the interest rate and related fees.

A SACCO must display specified financial and member information in a conspicuous place at each place of business throughout the year.

A SACCO must not do the listed business activities in Malawi without prior written approval from the Registrar.

A SACCO must notify the Registrar about by-law amendments within 30 days after the membership adopts them, and it must submit a copy of proposed amended by-laws for approval.

A SACCO’s financial year is 12 months ending on 31 December each year, unless the Registrar determines אחרת.

A SACCO must keep accounts and records that fairly show its affairs and explain all transactions and its financial position.

A SACCO’s financial statements must disclose certain large member holdings and any advance or credit facility above core-capital limits set by the Registrar.

A SACCO must elect a supervisory committee at its annual general meeting, and that committee must report to the board and to members on its findings.

The supervisory committee must appoint an external auditor, and the auditor must report to the board of directors. If a casual vacancy arises during the year, the board may appoint another external auditor with the Registrar’s approval.

A person may be appointed as an external auditor of a SACCO only if they are qualified under the Companies Act and are not connected to the SACCO in the listed disqualifying ways.

The Registrar may require a SACCO to fix audited accounts or provide more information if the accounts do not comply with the Act or are misleading.

A SACCO must keep its books, records, accounting systems, and procedures in the manner approved by the Registrar, and its records may only be destroyed under conditions and after a retention period the Registrar prescribes.

The Registrar must publish information received under the Act, but must not publish information that reveals an individual account holder’s financial affairs unless that holder gives written consent. Unauthorised disclosure of protected information is an offence.

The Registrar may order a SACCO merger, or if no merger partner is found, wind up the SACCO and appoint a liquidator.

When a SACCO is liquidated or wound up, remaining net assets must be used first to repurchase members’ shares, then any balance donated to a cooperative chosen by the members for cooperative education. The Registrar may refuse payments to people connected with the insolvency.

This section establishes the Deposit Guarantee Fund and places it under a Board of Trustees, which must invest the fund’s money in Government securities and in deposits with other financial institutions as directed.

The Minister must appoint a Board of Trustees.

The Board of Trustees must be made up of the listed members, and the Minister may make regulations about how nominations are made under subsection (1)(c).

The Board of Trustees must manage the Deposit Guarantee Fund, oversee its management, appoint an administrator, and regulate its own affairs.

The Board of Trustees must pay its members remuneration or expense allowances from the Deposit Guarantee Fund, after consulting the Registrar.

The Deposit Guarantee Fund consists of contributions from SACCOs, investment interest, borrowed funds, and donations or grants.

The Deposit Guarantee Fund must protect members’ deposits, but not shares, subject to trustee-determined limits approved by the Registrar.

SACCOs must contribute to the Deposit Guarantee Fund, pay the amount and timing set by the Board of Trustees, and may face penalty interest if they pay late.

The Board of Trustees must submit a report on the Deposit Guarantee Fund to the Minister within four months after each financial year ends.

An officer of a SACCO commits an offence if they fail to take reasonable steps to ensure compliance, accuracy of submitted information, or to provide required information to the Registrar or the Registrar’s agent.

An officer of a SACCO must not falsify or destroy SACCO records, submit false documents, obtain forged signatures, or take part in prohibited conflict-of-interest dealings.

An employer or SACCO member’s agent must deduct requested amounts from the member’s earnings and remit them to the SACCO within 14 days after month-end.

An employer may charge a fee or commission for making salary deductions and remitting them to a SACCO, but only in consultation with the Registrar.

A SACCO planning a merger, amalgamation, or asset transfer to another SACCO must notify the Registrar 30 days before the agreement is concluded.

A SACCO and its staff must keep transactions and member information confidential, but a SACCO may share necessary information with third parties if the customer consents.

Every SACCO must give the Registrar or other enforcement agencies of Malawi relevant information about transactions deemed suspicious under the cited anti-money-laundering Act.

Any person who obstructs the Registrar, refuses required information after a written request, destroys or hides documents to evade the Act, or knowingly and intentionally breaches a duty under the Act commits an offence.

A person who breaks an Act provision that does not already have its own offence commits an offence, and the Financial Services Act penalty rules apply where no specific penalty is set.

The Minister may make regulations for this Act, but only on the Registrar’s recommendation, and cannot regulate matters where the Registrar may issue directives.

The Registrar must use directives to exercise powers under this Act and may issue directives, guidelines, bulletins, and other regulatory statements.

A SACCO must pay out share deposits to a member who voluntarily withdraws when the existing members’ shares are sold to existing or new SACCO members.

Existing registered SACCOs can become provisionally licensed, but they must apply to the Registrar within six months of commencement to get the provisional licence automatically.

Existing SACCOs with provisional licences must apply for a licence within 3 years, meet solvency and capital adequacy conditions, and existing registered SACCOs must comply with the Act within 12 months except for ownership and capital adequacy.