Informal remittances continue to increase
Malawians living abroad have confided that attractive rates on the local parallel foreign exchange market amid forex shortages have made most of them to shun the formal remittance channels.
But Reserve Bank of Malawi (RBM) spokesperson Mark Lungu said in an interview on Wednesday that opting for informal channels to send remittances contravenes the country’s laws.

He said the parallel market deal is outright illegal business and the expectation is that such individuals should face the law.
Said Lungu: “RBM works in collaboration with relevant law enforcement agencies to investigate these suspected activities with the view to curb the malpractices.
“We understand individuals involved in these activities can get sophisticated and devise new ways of perpetuating these behaviours. RBM will continue to work with relevant institutions to deal with this.”
In an interview on Wednesday, a United Kingdom-based Malawian who opted for anonymity said, it has now become a norm to send remittances back home using individuals, rather than authorised dealer banks (ADBs).
Said the source: “We just have to find people who can give me kwacha back home and I either give them pounds here or I make purchases on their behalf at an agreed rate.
“This is much better because now with the official rate at K2 224 against the pound, the rate can go up to K4 000 depending on how we negotiate.”
A United States-based Malawian said on numerous occasions, they have pooled resources together and made purchases for people in Malawi, who in turn make payments in kwacha at agreed rates in their bank accounts back home.
The growth of the parallel foreign exchange market in Malawi, according to Scotland-based Malawian economist Velli Nyirongo, stems from economic and policy-related issues, with the significant driver being the widening spread between the official and the parallel market rates.
He said: “This disparity often arises from restrictive monetary and exchange rate policies that fail to align with market realities.
“These policies create an artificial scarcity of foreign exchange in formal channels, pushing individuals and businesses to seek alternatives in the informal market.”
Nyirongo said inefficiencies in formal remittance systems, such as high transaction costs and regulatory hurdles, further discourage the use of official channels, thereby fuelling the growth of the black market.
Asia-based Malawian economic statistician Alick Nyasulu said the trend, which negatively impacts formal remittances fuels inflation as traders use street rates.
“It is a complex scenario in my view though I am sure authorities know what needs to be done to crack down on illicit trading and reduce incentives to do so,” he said.
Meanwhile, the informal exchange rate continues to rise, hitting K3 100 against the dollar on the parallel market while the official rate is hovering at about K1 751, further widening the spread between the official and parallel exchange.
Ironically, while RBM data shows that imports were recorded at $288.5 million (about K504 billion) in October 2024, ADBs sold forex valued at $83.62 million (about K145 billion).
In November 2024, Malawi imported goods worth $301.2 million (about K527 billion)while ADBs made purchases of $74.25 million (about K130 billion).
RBM data shows that remittances have been on the decline in recent years, falling to $148 million (about K259 billion) in 2024 to $160 million (about K280 billion) in 2023.
Between 2019 and 2022, RBM data shows that Malawi’s net remittances have also fallen from $21 million in 2019 to about $6 million in 2022.
In Malawi, critical laws for the diaspora engagement include the Financial Services Act (2010), which provides for supervision and regulation of the financial institutions; the Exchange Control Act, which regulates in and outflows of foreign exchange; the Securities Act (2010), which regulates capital markets and portfolio investment and Payment Systems Act (No 15 of 2016) which regulates different payment systems.