Harnessing partnerships to support transparency and prevent corruption in Malawi

Sparked by mass public demonstrations, the historic nullification and re-run of the 2019 Presidential Elections in Malawi demonstrated the power of citizen and Civil Society Organizations (CSO) led collective action to spur institutional responsiveness and political accountability.

After this historic series of events, Malawi was at a turning point in its efforts to strengthen governance and improve public sector effectiveness - critical priorities in one of the world’s poorest countries, and also one of the most vulnerable to climate-related shocks. 

The new government laid out a bold agenda to address endemic corruption and implement systemic reforms. The administration passed a number of landmark legal and regulatory reforms but faced implementation challenges. Around the same time, our team at the World Bank – responding in part to increasing concerns about unsustainable debt levels fueled by corruption – was emphasizing ‘beneficial ownership transparency’ as a strategic focus of its global anticorruption work.

Beneficial owners are the real, human persons who own corporate vehicles such as companies. They are the people who can benefit from its operations and profits or control its activities. Open Ownership defines beneficial ownership transparency (BOT) as “government requirements for corporate vehicles to collect and disclose information about their beneficial owners”. This beneficial ownership transparency was sorely needed in Malawi to help prevent well-connected shell companies from bloating the government’s expenses. Helping Malawi implement beneficial ownership transparency – a key commitment in its Open Government Partnership Action Plan – could, for example, prevent a high-level official from secretly launching a shell company and awarding that company government contracts at inflated prices to covertly enrich themselves or their family. 

The government had recently passed a new set of regulations under the Companies Act to govern the collection of beneficial ownership information and sought a tool to incentivize its implementation. To support this process, we recognized that it would take a multi-stakeholder effort and engaged Open Ownership in the endeavor. They have been a partner on similar programs in Kenya and Nigeria. Other global and local anticorruption civil society organizations, such as Open Contracting Partnership and Open Government Partnership, have long been supporting Malawi’s transition.

A grant of $75,000 from the World Bank’s Governance & Institutions Umbrella Program Trust Fund began the collaboration between the World Bank, the Government of Malawi, anticorruption civil society leaders, and Open Ownership. With support from experts at Open Ownership, we undertook a diagnostic assessment to outline steps the government could take to implement beneficial ownership transparency reform, including an evaluation of the existing systems for beneficial ownership data collection, a further review of the existing legislative framework, and a technical capacity building needs assessment. 

The Chandler Foundation, along with the William and Flora Hewlett Foundation and MacArthur Foundation co-invested $2 million to launch the trust fund. Though externally financed by multiple donors and managed by the Global Governance Program, it has the flexibility to provide targeted seed funding for governance engagements in countries. It funded the diagnostic work needed to launch beneficial ownership implementation in Malawi.

A significant achievement of this seed funding and collaboration has been the embedding of beneficial ownership reform in the World Bank’s broad $80 million Malawi Fiscal Governance Program-for-Results, with disbursement linked indicators tied to $6.5 million dedicated to beneficial ownership results. These results-based indicators include: (i) the percentage of companies registered and re-registered on the Malawi Business Registration System that have successfully disclosed beneficial ownership information; (ii) the percentage of contracts awarded under the new national e-Procurement system that make beneficial ownership information available; and (iii) the percentage of licenses awarded to mining and logging companies that make beneficial ownership information available under the Malawi Extractive Industries Transparency Initiative (MWEITI). 

This partnership demonstrates how funds from private foundations can be catalytic in bringing aligned parties to the same table. This kind of funding can jumpstart collaboration and help overcome hurdles to progress. And this isn’t the first time foundations have established a fund to enable the World Bank to deepen its work and collaboration in a specific policy area, thereby magnifying the ultimate development impact. 

As these examples show, the World Bank is open to collaborating with civil society, foundations, and governments to a degree that is often not fully recognized or leveraged. For funders that seek to deploy catalytic funding to unlock larger systems change, the World Bank stands as a willing and powerful partner.