The Reserve Bank of Malawi says credit to private sector from commercial banks grew during the third quarter of 2023 to K1.2 trillion as at September.
The report indicates that the credit accelerated to 20.4 percent in the third quarter from 19.4 percent in the previous quarter but was lower than 22.3 percent registered in the corresponding quarter in 2022.
On a quarterly basis, the stock of private sector credit increased by K79.9 billion (7.2 percent) to K1.2 trillion in the review quarter which was however lower than an increase of K104.1 billion in the second quarter of 2023.
According to the report, sectoral analysis on private sector credit revealed that expansions were recorded in community, social and personal services (K37.0 billion); manufacturing (K23.7 billion); agriculture, forestry, fishing and hunting (K16.6 billion); wholesale and retail trade (K9.0 billion); restaurants and hotels (K2.7 billion); and electricity, gas, water and energy (K2.1 billion).
Financial Market Dealers Association President Leslie Fatch said under normal circumstances, credit was supposed to be going down due adjustments to the policy rate, which have made borrowing expensive, but such is not the case.
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He said much of the credit is financing consumption.
“Let us hope that, even though it is indicating consumption, people are starting small-scale businesses which will be good; otherwise, these figures are strange for the economy,” Fatch said.
Economics Association of Malawi President Betchani Tchereni said the increase is still a response to the adjustments to the policy rate in two folds.
He said the first is that because of rising inflation, people’s purchasing power has dwindled and they are borrowing to afford basic needs and that companies are borrowing to finance running costs.
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In its latest meeting, the RBM Monetary Policy Committee noted the subdued economic growth and therefore resolved to hold off further tightening in order to support economic activity.
