By Benadetta Chiwanda Mia:
The country’s banking system witnessed a significant expansion in September 2024, with net domestic assets (NDA) increasing by K175.2 billion to K6.9 trillion.
This growth was largely driven by an upswing in domestic claims, which rose by K130.2 billion.
In its monthly economic review for September, RBM said key contributors to this expansion were claims on the Central Government, which netted K124.3 billion, other financial corporations by K9.7 billion and the public non-financial sector by K4.3 billion.
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In contrast, claims on the private sector decreased by K8.1 billion.
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Additionally, other items net (OIN) grew by K45 billion, reaching K89.2 billion.
Bankers Association of Malawi Chief Executive Officer Lyness Nkungula said the performance has significant impact on lending strategies across the sector.
According to Nkungula, the expansion translates into increased lending capacity for the banks.
“With higher NDAs, banks have more resources to extend credit, potentially allowing for more aggressive lending strategies that can stimulate various sectors of the economy,” Nkungula said.
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Nkungula, however, said that the shift in domestic assets necessitates a balanced approach, compelling banks to diversify their portfolios between public and private sector credit to effectively manage risk.
She added that given the contrasting performances of public and private sector credit, banks might focus on sectors that promise higher growth potential or present lower risk profiles, maximising returns while ensuring stability.
“As banks expand their lending activities, they must ensure adherence to regulatory requirements related to capital adequacy and liquidity ratios to maintain financial system integrity,” she said.
The expansion presents both opportunities and challenges, necessitating policies that foster balanced credit distribution to ensure long-term economic growth and stability.
