The funds would be used to conduct a three-year nationwide drive to educate people against the dangers of witchcraft.
A preliminary investigation documented multiple cases of witch hunts and instances where witch doctors raped women and girls in an attempt to exorcise them.
"Women, children and the elderly are subjected to an alarming rate of witchcraft accusations and violence in Malawi," said George Thindwa, who heads the Association for Secular Humanism (ASH).
Witchcraft was outlawed in Malawi under a 1911 British colonial-era law.
Norwegian ambassador to Malawi, Asbjorn Eidhammer, said it was "amazing how little attention has been paid to these grave issues."
"It seems as if everybody is aware of the belief in witchcraft, including the violent hunting of alleged witches, but when discussing politics, economy or social questions, everybody seems to ignore the problem."