Discusses the most common methods of payment, such as open account, letter of credit, cash in advance, documentary collections, factoring, etc. Includes credit-rating and collection agencies in this country. Includes primary credit or charge cards used in this country.

Imports into Malawi are financed primarily through letters of credit (LCs).  Commercial banks require importers to provide cash up front to secure the LCs in order to hedge against the risk of possible foreign exchange losses.  Money is then transferred to foreign suppliers through correspondent banks.

Most companies pay each other through checks and bank transfers.  There is no limit on check payments; however, the Reserve Bank of Malawi (RBM) has considered limiting check payments to a maximum of 5 million Malawi kwacha (about $7,129) as an anti-corruption measure.  The retail economy still relies on cash, as credit and debit cards are not common in Malawi.

Mobile phone-based money transfers are an increasingly popular payment method.  Both major mobile phone companies offer this service, and many retailers and most of the major banks participate in one or both networks.

Some companies offer their customers credit with negotiated payment schedules; this is most commonly extended to other well-established companies in business-to-business transactions and to government, which frequently requires flexible payment terms due to cash flow problems.  Widespread lack of confidence in the Malawi government’s management of resources affects Malawi’s credit rating.
 

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