Mangochi, Vice President of the Republic of Malawi Dr. Saulos Chilima has advised commercial banks in Malawi to rework their interest rates if they are to survive.
Chilima gave the advice in Mangochi on Friday when he officially opened the Institute of Bankers in Malawi Annual Conference at Sunbird Nkopola Lodge.
The Veep noted that the interest rates of banks in the country remains high while those in neighboring countries and beyond are relatively low.
He challenged the banks to expand their portfolio by making loan conditions accessible to many potential borrowers.
I took time to compare a number of financial variables in few countries in 2016 using World Bank online source. The message is that banking services especially loans [in the country] are exorbitant and few businesses can survive while faithfully repaying the loan, Chilima said.
The Vice President said the other economies under comparison such as Zambia and Mozambique were not very much structurally different from Malawi, yet their real interest rates were much lower compared to Malawi.
He further observed that inflation rate was used as a scapegoat in Malawi which was not a genuine factor in determining lending rates.
Said Chilima: Among the five countries we have compared (Mozambique, Kenya, Zambia, Tanzania, and Singapore) Malawi has the highest real interest rate confirming the need to reduce it.
Another revelation is that the low ratio of credit to private sector to Gross Domestic Product (GDP) against the huge profits that banks declare means that more trading is in financial securities as opposed to supporting investment in real sector, he said.
Chilima said government expects banks to do their part to further contribute to the growth of the economy by providing financial resources at reasonable costs.
The Veep added that banks should also positively respond to set monitory policies since failure to do so would stifle the business sector, which he described as the engine for economic growth.
Given this reality, the role of banks in economic development in Malawi is diluted and needs to be enhanced by redirecting banking businesses from financial securities to productive sectors that create employment and foster economic growth, Chilima said.
On his part in an interview, Bankers Association of Malawi President Paul Guta concurred with the Veep saying low interest rates would indeed keep the banking industry afloat.
He, however, said there was already a positive gesture from the commercial banking industry saying the banks had started lowering their interest rates.
The conference which will run up to Saturday is being held under the theme, Bankers in Turbulent Times: What does it take to survive.
Source: Malawi News Agency � MANA