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Loan conditions still tight— Reserve Bank of Malawi

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betchani tchereni,

Access to finance remains a challenge in the country, with a latest survey by the Reserve Bank of Malawi (RBM) stating that loan standards and conditions are tight, making credit expensive or unreachable for some.

The Financial Stability Report says Malawians continue to be subjected to expensive and strict borrowing conditions from commercial banks.

Results of the survey show that six out of eight banks reported that they maintained tight credit standards and conditions for approval of loans while two banks indicated that they had tightened further the standards and conditions for approval of loans.

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This stance by the commercial banks is partly attributed to uncertainty in the operating environment following mounting inflationary pressures from unstable exchange rate, the Russia-Ukraine War and increasing commodity prices coupled with an increase in the level of Non-Performing Loans, particularly in the SMEs sector.

“This notwithstanding, some banks reported that they expect to ease credit standards and conditions for approval of loans particularly in the household and SME sectors as a deliberate strategy to grow the loan book in the sectors supported by the risk management strategies,” the survey results.

Economist from the Malawi University of Business and Applied Sciences Betchani Tchereni said the situation means banks made it more difficult for people to borrow.

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“Risk management is one key area which banks focus on because the money they manage is not theirs but that of their customers; therefore, they cannot just be giving it to people who might not be able to pay back,” he said.

Meanwhile, June 2022 Bank Lending survey findings showed that, predominantly, banks perceived an increase in demand for loans and credit lines across households, SMEs, and large enterprises sectors during the period.

These findings were generally consistent with what the banks had expected for this period during the December 2021 survey results but the perceived increase in demand for loans was registered mainly in the household sector, followed by small and medium enterprises, then the large enterprises.

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