Banks maintain reference rate
People and institutions borrowing money from financial institutions will, at least for now, have their borrowing rates static as commercial banks have maintained their reference rate at 17.3 percent.
The reference rate is the benchmark for other rates such as interest rate.
This comes days after the Reserve Bank of Malawi (RBM)’s Monetary Policy Committee maintained the policy rate at 18 percent.
The central bank made the announcement after its first Monetary Policy Committee meeting of 2023 held on Wednesday and Thursday last week.
RBM said the decision is premised on the need to watch inflation movements before some changes are made to the policy rate so that the inflation rate continues going down.
“Inflation was likely to remain in double digits in 2023, making it unconducive to support economic growth. At the same time, the MPC opined that loosening monetary policy in a double-digit inflationary environment could reverse the expected downward inflation path,” the statement reads.
The policy rate was raised to 18 percent in October last year and commercial banks followed by raising the reference rate slowly to 17.30 percent from around 13 percent when the policy rate was at 14 percent.
But National Association of Small and Medium Enterprises (Nasme) General Manager Frank Tauzi said, with the reference at 17.30 percent, consumers are still subjected to interest rates of over 25 percent, which makes it unaffordable, especially for SMEs.
“If industries are to grow, banks should make sure we have cheaper loans through, initiatives that make loans affordable, especially for small and medium enterprises. Otherwise their contribution to the economy will remain low,” he said.
Access to affordable finance by both industry players and individual consumers remains a challenge in the country.
Justin Mkweu is a fast growing reporter who currently works with Times Group on the business desk.
He is however flexible as he also writes about current affairs and national issues.