Malawi central bank to limit cheque value to K5m
Issuers of high value cheques will soon be dealt a heavy blow following an agreement by the Reserve Bank of Malawi (RBM)and the Bankers Association of Malawi (BAM) to limit cheque value to K5 million.
The two parties, in collaboration with other key stakeholders in the financial sector, sealed the agreement to cap the value of a cheque at the weekend in Mangochi.
RBM has since proposed July 1 2015 as the commencement day of implementing the new policy directive which has apparently put government and other private sector players at discomfort.
The capping of a cheque value comes at a time when cash and cheque transactions have dominated payments for goods and services despite recent introduction of innovative electronic payment solutions such as mobile money and internet banking.
RBM deputy governor (Economic Services) Naomi Ngwira complained on Friday that only a minor proportion of all payments are through electronic means.
“Most transactions, especially by government and individuals, continue to be made almost entirely in cash or cheques,” she complained.
She observed that the negative implications of predominantly cash and cheque transactions for the economy are significant in terms of currency management costs and fraud, respectively.
Ngwira said financial institutions are exposed to liquidity, credit and settlement risks due to the lengthy procedures associated with the cheque clearing process.
“However, RBM believes that the favourable conditions in the financial sector for the introduction of electronic payment solutions now exist following implementation of key enabling infrastructure in the past few months,” she said.
RBM in conjunction with commercial banks launched the Automated Transfer System (ATS) and the Central Securities Depository (CSD) in December 2014 and the National Switch (Nat Switch) in February 2015.
According to Ngwira, RBM’s focus is now to ensure that electronic payments gain ground so that all economic agents enjoy the benefits associated with faster and secure means of making payments.
On her part, BAM executive director Lyness Nkungula said the decision to implement an initial cheque value cap of K5 million per cheque, irrespective of the issuers, is part and parcel of initiatives to accelerate the adoption of electronic payments by Malawians.
“If all goes according to plan, the cheque value cap will become effective on 1st July 2015,” she said.
Nkungula said cheque limit is reasonable deterrent to mitigating the risk which BAM has witnessed over the years, including Cashgate.
According to RBM and BAM, cheques below K5 million make up 97 percent of annual cheque transactions hence the majority of the banked population will not be affected.
