Malawi has been a popular location for Lendwithcare lenders for a while now. Over the years, thousands of loans have been funded to help small business owners grow and sustain their livelihoods in the East African country. Our local partnerships with SolarAid, Modern Farming Technologies (MFT), and Microloan Foundation, have played a key role in delivering this life-changing support to hard-working people.
In this short article, we aim to highlight Malawi’s ongoing foreign exchange (FX) challenges, which have had a direct impact on some of the loans supported through Lendwithcare. We covered some of these challenges in a blog article in December 2023. However, we thought it would be helpful to dive deeper into the topic and provide added context around specific loans which were funded in 2024.
Understanding Malawi’s FX Shortages
Malawi has struggled with FX shortages for years, notably during the COVID-19 pandemic when the situation worsened. The country relies on donor funding, tourism, and exports such as tobacco, to bring in foreign currency. However, donor support has declined, tourism remains below pre-pandemic levels, and global tobacco sales have fallen, reducing Malawi’s overall earnings as a country.
Each year, tobacco sales provide a temporary boost to the economy, but this period is becoming shorter. In 2023, foreign currency shortages led to a 44% currency devaluation of the Malawian Kwacha in November, followed by further challenges in 2024. By October, foreign currency reserves had already run low, causing inflation to soar to around 35%. Many international businesses are struggling to repatriate funds, with some halting new operations in Malawi entirely.
Impact on Lendwithcare Loans
In May 2024, we made three large loan profiles available to fund solar-powered water pumps and help address Malawi’s severe drought conditions. Thanks to your generosity, over £84,000 was raised in just one week. However, due to foreign currency shortages, our partner MFT has faced difficulties making the planned repayments.
At the time of funding these loans, we had a degree of confidence that returning the funds to lenders would be an achievable goal. However, this has been rather more challenging due to the ever-evolving FX situation in Malawi.
MFT’s Chairman, Kevin Simpson, has expressed deep appreciation for lenders’ patience:
“We are grateful for the patience of Lendwithcare and we don’t take this for granted. We appreciate Lendwithcare’s business model and the need to be accountable to donors, so we want to work to repay the Futurepump loans as soon as possible.”
The team at MFT are currently making repayments from funds through their small UK operations, and lenders who contributed to these loans will have already received a small repayment. MFT remain hopeful that more funds will be available soon and any update will be communicated directly to the lenders who have generously supported these loans.
Looking Ahead
The FX situation in Malawi presents significant challenges, and MFT are currently exploring all solutions available to them. However, access to FX facilities remains difficult for our partners, and borrowing large sums from outside the country is not currently viable in some instances.
While we have paused funding new loan profiles from MFT for now, our other partners, Microloan Foundation and SolarAid, are less affected and continue to operate successfully. This is due to a number of factors, but the repayments they make will not be without challenges.
Please note that we share this update to remain transparent about the realities our partners face. Your support continues to make a meaningful difference to entrepreneurs in Malawi, and we deeply appreciate your patience and generosity.
If you wish to do so, consider supporting a loan in Malawi today. If you find there are no profiles, please check again in a few days.