Bad loans up 46.5%


By Taonga Sabola & Chimwemwe Mangazi:

Dalitso Kabambe

The country’s level of non-performing loans (NPLs) went up by 46.5 percent in the second half of 2019 to K40.3 billion in December from K27.5 billion in June, a Financial Stability Report by the Reserve Bank of Malawi (RBM) shows.

The central bank says most banks stated that NPLs increased marginally across all economic agents.


This was contrary to the June 2019 and December 2018 results that indicated that there was a marginal decrease in NPLs by all economic agents.

The report highlights that perceived increase in NPLs was partly due to business stagnation which led to delayed payments and easing of underwriting standards by banks due to competition.

The highest NPLs were reported in the wholesale and retail sector followed by community, social and personal services sector, Construction sector, Transport sector and the Agriculture sector.


Speaking during the operationalisation of the Malawi Agriculture and Industrial Investment Corporation in December last year, RBM Governor Dalitso Kabambe, said bad loans had dropped to their lowest at 4.3 percent.

Demand for loans on the other side remained high during the period under review.

The survey shows that the demand for loans rose by K59.2 billion during the six-month period to December 2019, which was marginally below the K59.4 billion recorded in the previous survey period.

The survey says four banks reported that demand for loans increased considerably, while the other four indicated that the demand for loans increased marginally during the surveyed period.

“Generally, more banks reported an increase in demand for loans for households compared to the number of banks that reported the same for the other two sectors (SMEs and large enterprises). Specifically, eight out of nine banks reported an increase in the demand for loans by households in the December 2019 survey.

“The increase in the demand for loans by the household sector was reported to be due to a number of factors, including a general increase in consumption expenditure, improved consumer confidence following entrenched macroeconomic stability and lower interest rates supported by deliberate strategies put in place by some banks to grow the households’ loan book,” the report says.

The report says with regards to SMEs, most banks reported that the demand for loans increased during the period under review, and the findings also remained unchanged from the June 2019 survey period.

Professor of economics at Chancellor College, Ben Kalua, said trends in increased appetite for borrowing are expected to continue owing to low interest rates.

“The trend in NPLs reflect historical experience, people borrowed during a high rate of interest before but now we are experiencing low interest rates for the first time in a long time. So people were chocked by the high interest rates,” Kalua said.

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