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Private sector credit improves in quarter2

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Latest figures from the Reserve Bank of Malawi (RBM) have shown that credit to the private sector grew by 3.3 percentage points in the second quarter to an annual growth rate of 20.7 percent from 17.4 percent in the first quarter.

A Monitory Policy Report for July published by the central bank further shows that, on monthly basis, private sector credit expanded to K738.6 billion in May from K723.4 billion in April 2021.

It also indicates credit increases of K20.5 billion for commercial and industrial loans and K1.1 billion for individual loans.

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“The upsurge was in tandem with the rebound in economic activity as the agricultural marketing season progressed during the period. However, repayments were made in respect of mortgages (K4.0 billion) and foreign currency denominated loans (K2.9 billion),” the report reads.

The figures correspond with earlier figures from the RBM that commercial banks increased borrowing from the central bank in May, which commentators said illuminated pressure for loan applications by the private sector.

Malawi University of Business and Applied Sciences-based economist Betchani Tchereni said it is encouraging that people are borrowing for commercial and industrial purposes.

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“We should also look at employment data to see whether these numbers transcend into increased employment or new construction projects but, otherwise, this shows that the economy was active,” he said.

The private sector mostly borrows for recapitalisation and financing of new companies or projects.

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