By Kingsley Jassi:
Commercial banks are expected to continue raking in profits as the financial sector is set to grow by 5.7 percent in 2026 but, this time around, it will not be Treasury bills fuelling the growth. It will be private investment.
This is according to the Reserve Bank of Malawi (RBM) ,which observes a shift in credit flow amid the fiscal authority’s reduced appetite for domestic borrowing.
Having registered growth of 5.9 percent in 2025, the 5.7 percent will emanate from increasing demand for financial products, according to the central bank.
“The improvement reflects increased demand for financial products and services driven by private sector borrowing for investment purposes. The sector’s growth for 2026 is projected at 5.7 percent, as fiscal consolidation measures are expected to reduce government borrowing, a key contributor to the sector’s profitability,” the central bank says in the financial and economic review.
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The central government, as reiterated by Finance Minister, Joseph Mwanamvekha , has demonstrated its policy reversal to reduce domestic borrowing following the ballooning public debt, which is now estimated at K24 trillion.
Further measures currently on the table include restructuring the debt to relieve the debt repayment pressure, although the commercial banks have expressed resistance.
But Bankers Association of Malawi President Phillip Madinga conceded in a recent interview that it is high time commercial banks shifted their focus on the real sector to spur economic turnaround.
“Some of the banks already saw this coming and scaled down lending to the government. It’s time that banks looked at financing the real sector because that is what will drive sustainable growth,” Madinga said.
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Such a shift manifested in the fourth quarter of 2025 when the public sector’s indebtedness to the banking system slowed its expansion, growing by K447.1 billion to K8.7 trillion, compared to an expansion of K941.5 billion in the third quarter.
However, that decline in credit growth did not benefit the private sector as its annual credit growth rate slightly decelerated to 44.7 percent in the fourth quarter from 45 percent in the previous quarter, although it was much higher compared to the corresponding quarter in 2024.
“However, on a quarterly basis, the stock of private sector credit increased by K55.4 billion (2.5 percent) to K2.3 trillion during the quarter under review,” the central bank observes.
The development was driven by increases in individual household loans and foreign currency-denominated loans amounting to K120.9 billion and K3.4 billion, respectively.
In contrast, commercial and industrial loans and mortgages recorded net repayments of K55.6 billion and K3.4 billion, respectively.
