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Industry credit uptake sluggish

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Betchani Tchereni

Credit flow to the manufacturing sector for capitalisation slowed in 2021 evidenced by the industry’s missing on top three sectors which consumed most credit from commercial banks.

According to figures from the Reserve Bank of Malawi’s (RBM) Monitory Policy Report of February 2022, credit from the banks to the private sector was dominated by community, social and personal services.

The report indicates further that wholesale and retail trade were second while the third consumer of credit was the agriculture, forestry, fishing and hunting sector.

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It indicates that, by the fourth quarter of 2021, the community, social and personal services sector comprised 29.5 percent (K256.6 billion) of the gross loans, followed by the wholesale and retail trade at 22.2 percent (K192.6 billion) then agriculture, forestry, fishing and hunting at 15.7 percent (K136.7 billion).

The three sectors had a combined aggregate that constituted 67.4 percent of the industry credit at the end of the last quarter in 2021.

In his State of the Nation Address, President Lazarus Chakwera said the rise of credit to community, social and personal services is a result of policy stance in which RBM maintained policy rate at 12 percent signifying the need for cushion from the effects of Covid.

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“We, as the Government, will ensure that the wholesale and retail trade sector is trading mostly in locally produced and manufactured goods as espoused in our implementation plans of Malawi 2063,” Chakwera said.

In its 2021 Business Environment Assessment report, the Malawi Confederation of Chambers of Commerce and Industry said lack of access to finance for the private sector, especially sectors that can contribute to the growth of the economy, was among major problems.

Economist from the Malawi University of Business and Applied Sciences Betchani Tchereni said, this means that sectors that can drive the economy continued staggering in 2021.

Tchereni added that there should be legal instruments that will propel banks to fund long-term projects through loans rather than giving out credit for consumption.

Malawi has an infant manufacturing sector which exposes the country to outside shocks.

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