oa Africa Insight - The structure and operations of the financial system of Malawi since independence

Volume 3, Issue 1
  • ISSN : 0256-2804



In a primitive subsistence economy there is hardly any need for financial institutions. Little money is used as a means of exchange or store of value and savings and investment are small whilst the latter is normally financed out of the savings and labour of the people who desire the capital goods. However, as the economy becomes monetized and the standard of living rises more money is used and the capacity to save increases with the result that some will have savings in excess of their own desired investments while others will have more investment opportunities. In such circumstances and in order to ensure sound economic development it is important to provide a sufficient money supply and to develop a ""market"" where excess savers and excess investors can meet. Thus, the development of the financial system of a developing country can be considered as both a signal of and a stimulant to its development.

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