By Chimwemwe Mangazi:
Debate continues over possible effects of the proposed interest rate capping on economy and the banking sector.
The proposal to cap interest rates was brought to Parliament in December 2016, and the august House recommended that a Private Member’s Bill be drafted.
Currently, consultations are underway to solicit views from stakeholders to be put in the Bill.
However, emotions also dominated the second consultative meeting which Parliament organised in Lilongwe on Wednesday as sector players differed.
While some opposed the move, saying it would crash the economy, others feel the decision would help protect the innocent borrower from exploitation by commercial banks.
Micro Loan Foundation Chief Executive Officer, Corrie Mulder, who is also Chairperson of the Malawi Microfinance Institutions Network (MAMN), said implementing the law would push financial institutions, especially microfinance finance firms out of business.
“There is unique evidence in the world that interest rate capping has not successfully solved the problems of countries and I believe that there is a lot of work that needs to be done before this Bill can actually go to Parliament, because everything we do must be in the best interest of the people of Malawi,” Mulder said.
Economics Association of Malawi, Executive Director, Maleka Thula, said capping interest rate is not a solution despite interest charges being on the high.
“Such policies have failed elsewhere a good example is Kenya, they capped interest rates in 2016 but the problems are instead of promoting private sector borrowing, borrowing has actually shrunk and the alternative then financial institutions lend to government so we all that what such increases it destabilizes the economy,” Thula said.
But Dowa West Constituency parliamentarian, Alexander Kusamba Dzonzi, said amid the concerns, the Bill would be tabled to Parliament for deliberation during the November seating.
He said the all the views would, however, be considered.
“Resi stance is normal. The bill suggests removing some people from their comfort zones so when they resist I understand,” Dzonzi said.