Bankers Association of Malawi (Bam), an umbrella body for commercial banks, has called for concerted efforts towards ensuring a lower interest rate regime in the country.
Newly elected Bam President McFussy Kawawa said this on Saturday evening at the bankers’ annual dinner in Blantyre.
He was responding to a call from Malawi University of Science and Technology Vice Chancellor Address Malata, who graced the occasion and lamented the elevated cost of borrowing in the country.
In her address, Malata said broadening access to finance by lowering interest rates would spur economic activity in the country and propel growth.
She added that interest rates reduction would not only benefit consumers but the banks too, which would widen their lending base.
“If the interest rates can go down, many people will borrow and use that money to develop the country. That is why I pleaded with banks to look at this matter with a sober mind because it is not about individuals but this country,” she said.
In his response, Kawawa said creating an environment which would facilitate lowering of interest rates would require concerted efforts.
While underscoring the essence of a lower interest rate regime to commercial banks, he said there were still many factors that would feed into a discussion to cut the rates.
“For example, how one can realise security for a loan and how long it takes has got to factor into the pricing and if we do not deal with that, it will still remain there,” he said.
Earlier this year, the United Nations Economic Commission for Africa said local banks were among the most profitable financial institutions in the region owing to high net interest margins.
At around 5 percent, deposit rates that banks were giving to customers were too low compared to lending rates which averaged 23 percent— over two times higher than headline inflation which now stands at 9.8 percent.
The yawning spread has also propelled debate lately, with other circles recommending interest rate capping as one of the possible remedies.
Also, addressing Economics Association of Malawi annual conference in Mangochi District recently, Vice President Saulos Chilima urged the commercial banks to work towards lowering their interest rates, a call he rated as non-negotiable.
He proposed capping the interest spread, saying if commercial banks were to raise their lending rates, they must pass-through the same to depositors.
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.