Malawi - Investment and Development Bank Project

WfrtI54 1 fG/ ? 1 - xecuiveDirector | Document of 2 - Permanent office Copy The World Bak FOR OFFICIAL USE ONLY FILE COpy Report No. 1914a-MAI MALAWI STAFF APPRAISAL REPORT THE INVESTMENT AND DEVELOPMENT BANK OF MALAWI LIMITED May 3, 1978 East Africa Projects Department Industrial Development and Finance Division This document has a restricted distribudon and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.  CURRENCY EQUIVALENTS US$ 1 K 0.909 K 1 US$1.1 K 1 million = US$1.1 million GLOSSARY OF ABBREVIATIONS NSO - National Statistical Office LRS - Local Registered Stock NBM - National Bank of Malawi CBM - Commercial Bank of Malawi INDEBXNK - Investment and Development Bank of Malawi Ltd. MDC Malawi Development Corporation ADMARC - Agricultural Development and Marketing Corporation CCDC - Capital City Development Corporation NIC - National Insurance Company NBS - New Building Society MHC - Malawi Housing Corporation POSB - Post Office Savings Bank CDC - Commonwealth Development Corporation DEG - Deutsche Gessellschaft fur Wirtschaftliche Zusammenarbeit FMO - Nederlandse Financierings-Maatschappij voor Ontwikkelingslanden N.V. EIB - European Investment Bank KfW - Kreditanstalt fur Wiederhaufbau FRR - Financial Rate of Return ERR - Economic Rate of Return FISCAL YEAR January 1 to December 31  FOR OFFICIAL USE ONLY MALAWI INVESTMENT AND DEVELOPMENT BANK OF MALAWI LTD (INDEBANK) STAFF APPRAISAL REPORT Table of Contents Page No. BASIC DATA ................................................ o ..... - o.ooo. ii I. THE INDUSTRIAL SECTOR .. ..... .o... ...... ...... ...... 1... . Contribution to the Economy and Performance .... . 1 Structure *.......... *e.................................... 2 Government Policies ....o. o .......... . .. o... . . .... 4 Recent Developments ........ -. . .......... .. .. ... . . . ...... .... ... 5 Small Scale Industries ..o o o.... ....... . . ... .. .....o...o..o.o 8 II. THE FINANCIAL SECTOR ... ... . ......... .... ... ... ...... 10 The Central Bank's Role, Credit Policies and Interest Rate Structure ......................... ooo.......................o... 10 The Institutional Base .- ... . -....-.. . .. . . . . . ......... . . . 11 III. THE INVESTMENT AND DEVELOPMENT BANK OF MALAWI LTD .-..... o. 16 Background, structure and Role .. .............. 16 Ownership ......- -.......... o.........................- - o .o.-.... . 16 Policies .-o-o-oo-o ............................. -..o.oo .....-- 17 Board of Directors and Management . ...... ... ..... 18 Staff and Organization ........ . . . . . . . . ....--. .. ... . . ... . . 19 Procedures ...... ............. ........... ..........- 20 Terms and Conditions of Loans: Interest Rates .... oo 22 Auditors ..-oo-o ........................... ............ - .... .o.. 23 IV. OPERATIONS AND FINANCE ........ . . . . . . . . . . . . . . . . . . .. ...... 23 Operations ....... . ......... ooo..... o....o........................... 23 Financial Condition .-... . ...... .... -. . ... . . ....... ... . 25 Resources ................................ 25 Operational Performance ..- .............. 26 This report was prepared by Messrs. Jose Luis Mombru and Michel Cramer following their visit to Malawi in November 1977. This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.  -2- Page No. V. PROSPECTS .................. ................. ............. 27 Industrial Development ........... .................... ... 27 INDEBANK's Strategy ............................... .... 28 Forecast Operations ....... ...... .......... .. .. ....... 28 Resource Requirements ................. ... ............. 29 Forecast Financial Results ......................... ... 31 VI. THE PROPOSED BANK LOAN AND IFC INVESTMENT ................. 32 Recommendations ........ ............... ..... . ........... 32 Main Features of the Bank Loan ....................... 32 Support to INDEBANK .............. ... .................. 32 Main Features of the IFC Investment ................... 33 Objectives, Benefits and Risks ....................... 34  - 3 - LIST OF ANNEXES Annex No. 1 Malawi, INDEBANK - Board of Directors. 2 Malawi, INDEBANK - Organization Chart. 3 Malawi, INDEBANK - Summary of Past Operations (1973-1977). 4 Malawi, INDEBANK - List of Projects Approved (as of December 31, 1977). 5 Malawi, INDEBANK - Analysis of Total Approvals (Loan plus Equity). 6 Malawi, INDEBANK - Summary of Investment Portfolio. 7 Malawi, INDEBANK - Resource Position as of December 31, 1977. 8 Malawi, INDEBANK - Summary Balance Sheets 1973-1977. 9 Malawi, INDEBANK - Summary Income Statements 1973-1977. 10 Malawi, INDEBANK - Summary Sources and Uses of Funds Statements, 1973-1977. 11 Malawi, INDEBANK - Financial Ratios, 1973-1977. 12 Malawi, INDEBANK - List of INDEBANK Project Possibilities as of November 30, 1977. 13 Malawi, INDEBANK - Projected Operations, 1978-1982. 14 Malawi, INDEBANK - Projected Balance Sheets 1977-1982. 15 Malawi, INDEBANK - Projected Income Statements, 1978-1982. 16 Malawi, INDEBANK - Projected Sources and Uses of Funds Statements, 1978-1982. 17 Malawi, INDEBANK - Projected Financial Ratios, 1978-1982. 18 Malawi, INDEBANK - Schedule of Projected Draw-Downs from Proposed Bank Loan of US$3 million. 19 Malawi, Legislation Relevant to the IFC Investment in the Investment and Development Bank of Malawi, Ltd. 20 Malawi, INDEBANK - Related Documents and Data Available in the Project File.   MALAWI INVESTMENT AND DEVELOPMENT BANK OF MALAWI LTD (INDEBANK) Basic Data Date of Creation: December 30, 1972 Ownership Paid-Up Capital as of September 30, 1977 K '000 % ADMARC (Malawi) 710 25 CDC (U.K.) 710 25 DEG (West Germany) 710 25 FMO (Netherlands) 710 25 Operations 1973 1974 1975 1976 1977 Total -___________---- = (K '000)