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Private sector credit grew by 11% in 2018

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By William Kumwembe:

Credit extended to the private sector went up by 11.5 percent in 2018, the Reserve Bank of Malawi (RBM) indicates.

Figures contained in the 2018 RBM Annual Report issued on Tuesday show that the figure is compared to 0.4 percent growth of private sector credit recorded in 2017.

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In real terms, private sector credit grew by 1.6 percent in 2018 compared to a contraction of 6.7 percent in 2017.

“The growth reflected favourable macroeconomic outlook based on easing inflation and lagged effects of reduction in interest rates in the year,” reads the RBM report in part.

All loan types registered growth, with commercial and industrial loans recording the highest growth of K20.2 billion to a stock of K178.1 billion at end 2018.

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Mortgages, foreign currency denominated loans and individual and household loans increased by K8.6 billion, K6.4 billion and K2.9 billion to K41.0 billion, K131.5 billion and K127.9 billion, respectively.

Further, commercial banks provision for loan losses decreased by K8.8 billion to K21.7 billion, mainly on account of write-offs in the year.

In terms of economic sectors, the growth in credit emanated from the manufacturing sector (K11.7 billion), wholesale and retail trade sector (K7.7 billion), transport, storage and communications sector (K6.0 billion), real estate sector (K6.0 billion), construction sector (K4.9 billion), restaurants and hotels sector (K4.2 billion) and community, social and personal sector (K2.1 billion).

Meanwhile, credit to agriculture, financial services and electricity, gas, water and energy sectors slumped by K9.5 billion, K3.9 billion and K1.6 billion, respectively.

“In terms of proportions to the total credit stock, Wholesale and retail trade sector, at 25.3 percent, represented the largest share of the total private sector credit.

“Agriculture, manufacturing, and community, social and personal services sectors claimed 20.8 percent, 18.7 percent and 10.5 percent of the total outstanding credit stock, respectively.”

Speaking last week after announcing a 100 basis points slash in policy rate from 14.5 percent to 13.5 percent, RBM Governor Dalitso Kabambe, said he expected private sector credit to continue rising going forward.

He said this would influence increased private sector productivity which would lead to economic growth.

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