Economist for mandatory lending to private sector
An economist from the Malawi University of Business and Applied Sciences Betchani Tchereni has said the country needs to formulate a legal framework that will protect private sector players from the government’s dominance on the debt market.
This comes as the gap between public and private sector credit remains wide with the government dominating.
In January this year for example, public sector credit was recorded at K2.5 trillion against a private sector credit of K1 trillion, according to figures from the Reserve Bank of Malawi (RBM).
Tchereni said a deliberate law should be crafted to make it mandatory for commercial banks to push more than 50 percent of their loan facilities to private sector players.
He argued that this is the only sure way that Malawi can achieve industrialisation as embedded in the Malawi 2063 development plan.
“We need a law which should be attached to licensing which should indicate the lending which an institution can do.
“That is the only way lending institutions will bring the money that is needed by the private sector and the development that we need and the developmental role that banks are supposed to play is going to be clear and observable,” Tchereni said.
In a separate interview, president of the Bankers Association of Malawi McFussy Kawawa said in a free market environment, a law of that nature would not be helpful.
“The government and RBM in particular should be creating an environment which promotes private credit. It is also important to realise that banks usually lend to the private sector first and it is the excess that goes to fixed income securities.
“Rarely would a bank stop lending to the private sector in favour of investment in fixed income securities,” Kawawa said.