Commercial banks have revised downwards their reference lending rate for May to 20.60 percent from 20.80 percent in April, slightly easing the cost of borrowing.
About 4 of the country’s eight commercial banks announced the adjustments in separate statements released yesterday.
The banks have been gradually easing lending rates from 25.20 percent in January, following a decline in Treasury bill yields. The rate fell further to 20.80 percent in April.
Bankers Association of Malawi President Philip Madinga said the downward revision of the rates was market-driven, saying it reflected gradual normalisation in the financial sector.
Madinga attributed recent movements to macroeconomic stabilisation and restored market confidence, which, he said, had enabled banks to price credit more efficiently.
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“Headline inflation has moderated from the 2025 highs of 30 percent to around 24 percent. The ushering in of a new government and clear reform-signalling have also improved sentiment,” he said.
According to Madinga, monetary policy transmission has also contributed to the trend, with banks’ cost of funds easing marginally and now being reflected in the reference rate.
He said the banking sector was, however, cautiously optimistic about sustaining the trend, adding that the path remained data-dependent.
Madinga said continued disinflation, improved foreign exchange availability and sustained fiscal consolidation could support further measured easing through 2026.
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“Banks remain committed to responsible lending and financial stability. Our priority is to transmit monetary policy efficiently while safeguarding asset quality,” he said.
Economist Marvin Banda described the marginal decline in the lending rates as a faint but welcome signal of easing in Malawi’s credit environment.
“At best, it reflects early signs of stabilisation rather than a decisive shift toward cheaper credit. Seasonal liquidity variations within and outside the banking sector may also have had a minimal impact on the rate,” he said.
Following its April meeting, the Monetary Policy Committee (MPC) maintained the policy rate at 24 percent, citing modest decline in inflation.
Headline inflation declined to 24.3 percent in the first quarter of 2026, with the Reserve Bank of Malawi projecting an average of 22 percent for the year, down from 28.4 percent in 2025.
