With financial support from Project K, Mulanje Mountain Conservation Trust (MMCT) is facilitating yet to be the first Payment for Ecosystem Services (PES) action within the watershed catchment of Lichenya River on Mt Mulanje in the Southern Malawi. The commitment was made available to Mulanje Electricity Genera- tion Agency (MEGA) – a social enterprise,to finance repair of one hydropower generation scheme in exchange for a long-term financial obligation to support upstream catchment landscape management.MEGA is generating and distributing electricity through a mini-grid to local village communities with its power schemes installed on the Lichenya River. The action focuses on renovation work to repair the flood damaged and improve the climate resilience of the Bondo 2 scheme by MEGA and environmental restoration of the catchment through tree and perennial grass planting, improved land resources management of the adjacent farm fields implemented by farming families. Currently, MEGA is providing finance based on 8% monthly electricity sales with an additional 100% co-financing from MMCT in this early stage of the scheme.

The past forest degradation status of the Lichenya River catchment renders the micro-hydro scheme unsustainable due to possible incidences of reduced water flow and infrastructure damage. For instance, in January, 2015, the flush floods damaged the scheme structure that was almost close to function and the work started all over again. Again, the reduced water levels in the dry months of October and Novemberaffects power generation. The damage of the scheme in 2015, and reduced power generation in dry periods were the driving factors for the need to ecologically manage the catchment to sustain desirable water flow and protect infrastructure from the impacts of any future flush floods. The strategy used to do this is environmental restoration and management through a Payment for Ecosystem Services approach.