By Benadetta Chiwanda Mia
The latest financial report from the Reserve Bank of Malawi has revealed significant growth in the country’s commercial banking sector, with both assets and liabilities rising between August 2023 and August 2024.
The report on Commercial Banks’ Assets and Liabilities, covering data from January 2000 to August 2024, indicates a substantial shift in banking dynamics, largely driven by increased government borrowing, private sector deposits, and a growing demand for credit.
During the review period, total liabilities in commercial banks surged by 50.3 percent, rising from K4.22 trillion to K6.33 trillion.
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A notable contributor to this rise was private sector deposits, which increased by nearly K1.26 trillion.
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This growth reflects heightened confidence in the banking system amid broader economic recovery efforts.
One of the figures standing out in the report is the rise in government borrowing as claims on government nearly doubled, increasing by 85.2 percent to reach K 2.77 trillion, as commercial banks absorbed a larger share of government debt.
Additionally, loans and advances increased by over 400 percent, highlighting a greater willingness within the banking sector to lend.
There was also a significant rise in interbank lending, as evidenced by a 124 percent increase in liabilities to domestic banks, underscoring a growing demand for liquidity within the financial system.
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Despite the rapid growth in liabilities, the banking sector’s total assets expanded by the same margin of 50.3 percent, matching the liabilities and signaling a balanced growth trajectory.
The increase in assets was primarily driven by a rise in claims on domestic banks and Treasury Bills, along with an increase in liquid reserves held by commercial banks.
Economic expert Bertha Chikadza said the year-on-year performance reflects interplay of expansionary fiscal conditions and tighter monetary policies, coupled with rising private sector deposits, which grew by 47.5 percent.
According to Chikadza, this indicates a potential boost in private sector confidence.
Chikadza also observed a significant increase in interbank lending and borrowing, with a 124.1 percent rise in liabilities to domestic banks and a 65.7 percent rise in claims on domestic banks.
“The 85.2 percent growth in claims on the government suggests substantial investment in government securities, likely driven by ongoing fiscal deficits,” Chikadza noted.
She further pointed out that the minimal increase in Treasury Bills (1.9 percent) during the period under review suggests that banks might be focusing on other forms of government borrowing.
“Overall, the financial sector’s expansion aligns with broader economic trends, including government borrowing and increased liquidity within the banking system,” she added.
While the sector’s expansion indicates growing financial sector resilience, concerns remain over the long-term sustainability of government borrowing, as public debt reached K15.1 trillion by June 2024. Additionally, the figures also pose concerns of potential risks associated with liquidity support from the Reserve Bank of Malawi.
