Interest rate capping draws mixed reactions


By Taonga Sabola:

Emotions Wednesday dominated a consultative meeting on interest capping which Parliament in Blantyre organised as private sector players differed on the proposed bill.

While the Bankers Association of Malawi (Bam) opposed the move, saying it would crash the economy, Indigenous Businesses Association of Malawi (Ibam) defended the decision, saying it would help protect the innocent borrower from exploitation by banks.


The proposal to cap interest rates was brought to Parliament on December 8 2016 by Dedza North West Member of Parliament (MP), Alekeni Menyani, and the august House recommended that a Private Member’s Bill be drafted.

“Having noted that exorbitant interest rates on loans obtained from banks and other lending institutions have resulted in failure by most citizens in the Republic of Malawi to service the loans and in some cases forfeiture of property, this House resolves that a Private Members Bill prohibiting any bank and lending institutions from recovering more than 100 percent of the loaned amount, be drafted and introduced in this House for consideration,” reads a recommendation from Parliament.

But during Wednesday’s meeting championed by Dowa West MP Alexander Kasamba Dzonzi, Bam said such a proposal has proven to be a failure in a number of countries in Africa.


Bam President, Paul Gita, said interest rate capping nearly led to crashing of relatively powerful economies such as those of Kenya and Zambia.

Guta said such a bill, if passed into law, could not only crash banks but the economy as a whole.

The Bam chief said, instead of thinking of capping interest rates, the discourse should centre around factors behind high interest rates which are resulting in borrowers defaulting on their loan obligations.

“There is death in such a bill. I see death not only of banks but the entire economy,” an emotional Guta said.

He warned against rushing tabling such a bill in Parliament, saying lessons need to be drawn from countries where interest capping has failed.

“We need more time to analyse the situation and learn from other countries,” Guta said.

But Ibam President, Mike Mlombwa, said the bill could help save Malawians from marauding banks who take advantage of lack of proper legislations to victimise borrowers.

“There are people who borrowed K100 million, for example. You find that they have paid back K150 million but they still remain with K300 million to pay back.

“This is very unfair. How can Malawians develop in such an environment?” Mlombwa quizzed.

He said Malawi does not need more time on the interest capping discourse, arguing that a lot of time has been wasted on the same.

“This matter is very simple. Technocrats in the banking sector must just analyse why interest capping failed in other countries and advise on how best we can avoid a repeat of the same,” Mlombwa said.

Malawi Confederation of Chambers of Commerce and Industry Head of Communication, Millie Kasunda, said authorities should not hurry in tabling the bill without adequate information.

“We are not for or against the bill but would like to see more research being done to make sure we do the right thing,” Kasunda said.

Kusamba Dzonzi said he expects that the bill would be tabled during the November meeting of Parliament.

“From here, we will be meeting the Reserve Bank of Malawi, Treasury and other key stakeholders to make sure that we have as much information as possible on the matter,” Kusamba Dzonzi, an economist, said.

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