Facing the brutality of high lending rates


In February 2015, Blantyre-based businessman Richard Chaponda had a rude awakening when officers from one of the commercial banks in the country stormed his Dika Hotel in Chirimba to repossess it over a loan he had obtained from the bank in 2012.

Apparently, Chaponda had taken a loan amounting to K188 million from the bank which was to be repaid over a 10 year period up to February 8, 2022.

However, by early 2015 the bank started accusing the businessman of defaulting on repayments but Chaponda later said on Times TV’s Point Blank programme that he was repaying his loan as scheduled.


It had to take a court order in 2015 for Chaponda to be saved from having his hotel confiscated by the bank which had also already advertised it for sale in the newspapers. The bank was now claiming an amount of K224 million from Chaponda even though Chaponda claims that he only accessed K94 million, being 50 percent of the K188 million facility provided to him by the bank.

Chaponda is still tussling with the bank in the courts over the matter which has been blamed by experts on mi s under s t and ings between Chaponda and the bank on terms of the loan as well as skyrocketing interest rates in Malawi.

Chaponda is just one of the entrepreneurs and individuals in Malawi whose property has been or is subject to repossession by banks and other lending agencies due to problems of loan repayments as a result of high interest rates in the country.


Malawi newspapers are now awash with adverts of houses and other properties being offered for sale by banks and estate agents after being confiscated over overdue loans.

Malawi’s interest rates, now hovering around 45 percent, remain the highest on the continent and prohibitive for growing businesses, experts say.

“With the ever high interest rates, businesses are failing to grow in the country. We have even noted with shock the high magnitude of property being sold in the various newspapers by the various banks. This is a sign that things are not working as desired,” said Cuthbert Chinguo, general manager for Axa Bus Company, a leading player in the transport sector.

Chancellor College economics professor Ben Kalua blames the spate on exorbitant interest rates currently charged by banks.

“It is justifiable for the banks to let off the defaulters property because as a business they still have to recover their money. However, going by the rate of loan defaults in the system, it is alarming and a clear indication that the rates remain exorbitant,” said Kalua.

A recent report by the Reserve Bank of Malawi (RBM) indicates that during the year 2014, there was a shift in the level of lending and quality of assets which was characterised by a decline in lending and deteriorating quality of assets.

The industry loan book grew by 19.1 percent from K269.4 billion in 2013 to K321.1 billion in December 2014 while lending ratio rose from 56.6 percent in December 2013 to 58.3 percent in December 2014 due to increases in the gross loans and leases as a proportion of total assets.

Cumulatively, non-performing loans grew by 16.3 percent from K41.1 billion in 2013 to K47.8 billion in 2014.

This, according to RBM spokesperson Mbane Ngwira, implies the continued growth in the rate of default on loan payment.

“We cannot talk of interest rates in isolation to inflation rate, that is the reason we try to tackle the inflation rate. As long as the inflation rate is the highest in the region, then the interest rates will also be the highest,” says Ngwira.

He, however, disputed that the seizures of the assets by the lending institutions is only limited to high lending rates, saying there are other leading factors.

“We don’t look at high rates as the only indicator. We get figures from the banks on the non-performing loans. They are not repossessing the house on the basis of the high rates. There is a lot involved. There are several factors to the defaulting including negligence,” said Ngwira.

But Economics Association of Malawi (Ecama) Executive Director Edward Chilima says change in fundamentals in the economy would help address the challenges.

“Interest rates and inflation have remained very high, and the purchasing power of majority consumers has drastically gone down and activities in the private sector have gone down,” faulted Chilima.

The fact is: Chaponda and other entrepreneurs, big or small are under siege and would either resign to fate or get saved by court orders unless Malawi finds a way of reducing its lending rates to viable levels of at most 20 percent.

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