Almost two years after Malawians last heard of the interest capping discourse, debate on the matter resurfaced in Parliament Thursday when Mangochi South West Member of Parliament Shadreck Namalomba moved a motion proposing the drafting of a bill to cap interest on bad loans.
However, Speaker of the National Assembly Catherine Gotani Hara blocked the tabling of the motion on technicalities, saying Namalomba did not follow procedures when coming up with the motion.
With Parliament rising today after five weeks of deliberations during the Budget Meeting of Parliament, Namalomba said he would follow protocol and bring the motion back to the august House when it reconvenes around May.
“That having observed that exorbitant interest rates on loans obtained from banks and other lending institutions have resulted in failure by most citizens of the Republic of Malawi to service the loans and in some cases forfeiture of property, this House resolves that a Private Member’s Bill that prohibits all commercial banks and all finance lending institutions from recovering more than 100 percent of the principal loaned amount be drafted and introduced in the House for consideration,” the motion reads.
During the 2014/19 cohort of Parliament, a similar piece of legislation was moved by the then Dowa West legislator Alexander Kusamba Dzonzi, which led to the drafting of a bill but did not yield the desired results as the House was dissolved before the bill was tabled in Parliament.
But, briefing reporters yesterday, Namalomba said the piece of legislation he is pushing for is a bit different from the earlier one, in that the current one is advocating capping interest on bad loans and not capping interest rates in general.
He said he was pushing for the crafting of the In-duplum Law, which is applicable in countries such as South Africa and helps cushion borrowers from powerful financial institutions.
Addressing a Monetary Policy Conference in Mangochi, the then Bankers Association of Malawi (Bam) president Paul Guta said the capping of interest rate was not the solution for reducing interest rates in the country.
“We agree with everybody that says interest rates are high and that’s true. But I think the real issue becomes what do we do about it? The questions then become do you force it into the market or you work for it to do the right things to have the right outcome,” he said.
Former Reserve Bank of Malawi governor Dalitso Kabambe said, at the conference, that interest rate cap was not a new phenomenon in Malawi.
He is on record to have said that, until 1987, the central bank was setting a cap on interest rates, commercial banks were respecting such an arrangement and instruments were being put in place to enforce it.
He, however, said RBM stopped capping interest rates in 1988, allowing commercial banks to set their own rates.