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Demand for loans surges

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Ben Kalua

Findings of a survey by the Reserve Bank of Malawi (RBM) has revealed that demand for loans went up by K19.2 billion to K653.5 billion between January and June 2020.

Mostly, the loans were demanded by Small and Medium Enterprises (SMEs) and households.

All the eight banks in the country registered an increase in demand for loans from SMEs, while seven saw an increase in the household sector.

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Three banks saw an increase in big enterprises, three registered unchanged demand while two saw a decrease in the sector.

The rise in demand for loans is attributed to economic effects of the Covid-19 pandemic among many other factors

“The perceived increase in loan demand by SMEs was reported to have mainly risen from growth in working capital needs, low and stable interest rates, restructuring of existing loan portfolios by the borrowers in face of Covid-19 and need for payment of salaries as business balance sheets continue to suffer from the negative effects of the pandemic,” reads part of the survey report.

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The Central Bank indicates that the survey has also predicted a continued increase in the second half of the year, emanating from assumed easing out of the Covid-19 restrictions, political stability after fresh election, improved access to banking services and continued working capital needs.

Meanwhile, Chancellor College economics professor, Ben Kalua, indicates that the increased borrowing in the un-conducive environment of Covid-19 may lead to mixed performance of loans as some companies have found fortunes in the pandemic while others are suffering.

“It is a challenge because we are talking about big businesses seeking bailouts from government globally but in the same atmosphere we see tech companies thriving so it will lead to a mixed bag,” Kalua said.

Demand for loans has been rising in the past years as businesses blossom and banks register increased numbers of customers.

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