1. What type of loans do you offer to Local Authorities?

Ø  DFLA finances commercial projects that would enhance resource mobilization for councils.

a)   Infrastructure Loans – That finances infrastructure projects that include construction, renovation and refurbishment of the following rest house, lodges, motels, markets, butcheries, houses, access roads and parking facilities, water kiosks and office complex.

b)     Non- Infrastructure Loans - Finances Non-Infrastructure Projects that include procurement of the following: waste collection vehicles, water bowser, septic tank emptier, multipurpose trucks, machinery such as excavator, backhoe loader, graders, tractors, ambulances, hearse, Preparation of Quinquennial Valuation Rolls (QVRs).

c)     Bridge Financing- Finances urgent short -term projects pending funding from other funding agencies.

2. What is the interest rate on the loans you offer to Local Authorities?

Ø  Interest rates are Pegged at Reserve Bank prime plus/minus 1 percent

3. How long is the loan repayment period for Local Authorities?

a)     Infrastructure loans     – Maximum 10 years with 12 months grace period on principal only

b)     Non-infrastructure loans – Maximum 5 years with 6 months grace period on principal only

c)     Bridge Financing – Maximum 6 months with no grace period

4. Are there any fees or charges associated with taking out a loan for Local Authorities?

Ø    Yes, Local authorities pay a non-refundable fee of 1.5 percent of the loan as an appraisal fee before disbursement.

5. What documentation is required to apply for a loan?

Ø   Submission of project proposal with the following attachments

a)     Monthly and yearly cash flow

b)     Minutes of the full council meeting

c)     Detailed project cost (3 Quotations)

d)     Pledged   collateral have title deeds

e)      IPDC minutes

6. What is the processing period for the  loan application?

Ø  Maximum processing period of 3 months after LA has satisfied all prior conditions.

7. What is the maximum loan amount that Local authorities can borrow?

Ø  The maximum amount of loan granted will be determined by the LAs repayment capacity, viability  of the project and risks associated with the project to be financed.

8. What criteria do you use to determine if a local Authority is eligible for a loan?

Ø   Loans will be granted according to Councils financial position. Consideration to grant a loan to a LA will be based but not limited to the following;

a)      Credit history of the councils

b)     Capacity of the council to repay

c)      Collateral

d)     Cash flow position of the council

e)      The purpose and viability of the project

9. Is collateral required for a loan to Local Authorities?

Ø  Yes, DFLA shall accept the following as collateral for their loans

a)      Legal Mortgages/charges over landed property.

b)     Moveable assets: i.e. equipment, machinery, vehicles; etc.

10. What happens if a Local Authorities is unable to make their loan repayment?

Ø  DFLA repossess  the assets guaranteed in accordance with the procedures consistent with the Microfinance Act and other applicable statutes.

11. Are loan prepayments acceptable?

Ø  Yes, they are recommended.

12. What support do you offer to Local Authorities during the loan application and repayment?

Ø  In the event that the Local Authority does not have the in-house capacity to prepare the project proposal, DFLA provides the necessary assistance in writing the proposal. DFLA offers financial guidance through out the repayment period to LAs.

13. Are there any restrictions on how Local Authorities can use the loan funds?

Ø   Yes, funds are to be used only for the intended purpose as agreed in the Loan agreement form.

Ø  Disbursements are done to directly to  the recommended contractors or suppliers by the Council.

14. Is there grace period for repayment of the loan for Local Authorities?

a)     Infrastructure loans –  Negotiable 12 months grace period on principal only.

b)     Non-infrastructure loans –  Negotiable 6 months grace period on principal only.

c)     Bridge Financing – no grace period.

15. Can Local Authorities have a top up loan while serving another one?

Ø  The number is dependent on the capacity of the Local Authority to repay the loan and the viability of the project.

Ø   

16. What are the sources of income for DFLA?

Ø  Interest from the disbursed loans being a revolving fund.

Ø  Interest from short term investments of idle funds awaiting disbursements.

Ø  Loan appraisal fees.

Ø  Grants from Government and interested development partners.

All the 35 councils in Malawi are eligible namely:

Cities: Blantyre, Zomba, Lilongwe and Mzuzu,

Districts: Blantyre, Chiradzulu, Mwanza, Neno, Nsanje, Chikwawa, Zomba, Phalombe, Thyolo, Mulanje, Machinga, Mangochi, Balaka, Ntcheu, Dedza, Lilongwe, Mchinji, Dowa, Salima, Ntchisi, Kasungu, M'mbelwa, Rumphi, Karonga, Nkhatabay, Chitipa , Likoma, Nkhotakota,

Municipals: Kasungu, Luchenza and Mangochi.