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Private sector credit rebounds in March

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Private sector borrowing rebounded in March 2018 following four consecutive months of decline, figures from the Reserve Bank of Malawi (RBM) show.

This could be partly attributed to improvements in business activity during the month of March.

In its March 2018 Monthly Economic Report released on Thursday, RBM says credit to the private sector increased by K8.2 billion to K398 billion in March 2018. This was slightly higher than K396.4 billion recorded in March 2017.

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According to the report, mortgages, foreign currency denominated loans and commercial and industrial loans increased by K1.4 billion, K711.8 million and K521.3 million to K39.4 billion, K140.7 billion and K142.8 billion, respectively.

Further, commercial banks lowered their provisions for loan losses by K7.5 billion to K51.3 billion.

Meanwhile, individual household loans registered a decrease of K1.9 billion to K126.4 billion.

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In terms of economic sectors, wholesale and retail trade continued to represent the largest share of outstanding loan stock at 27.6 percent.

“Agriculture, manufacturing and community services constituted 26.6 percent, 17.3 percent and 10.7 percent of the credit stock, respectively,” reads the report.

Malawi Confederation of Chambers of Commerce and Industry President, Prince Kapondamgaga, recently said, despite the significant fall in cost of borrowing, businesses are struggling to access finance from the country’s institutions.

In terms of public sector credit, public sector indebtedness to the banking system increased by K3.4 billion to K565 billion in March 2018, and was higher than K393.8 billion in March 2017.

Net credit to central government rose by K4.3 billion to K560.7 billion (K383.2 billion in March 2017) while credit to statutory bodies declined, albeit marginally, by K858.4 million to K4.4 billion.

At the commercial banks, net credit to government increased by K22.4 billion to K142.8 billion in the month compared with an increase of K10.9 billion to K100.7 billion in March 2017.

“The outturn was on account of two factors. Firstly, there was an increase in commercial banks’ holding of Treasury bills and Treasury notes amounting to K10.7 billion and K9.9 billion to K123.4 billion and K93.6 billion, respectively. This mainly followed offloading of government securities by RBM to the commercial banks.

“Secondly, central government drew down its deposits with the commercial banks to K74.2 billion in the review month from K76.0 billion in February 2018. In contrast, net credit to central government from the monetary authorities went down by K18.2 billion to K417.9 billion in the month compared with a drop of K11.3 billion to K282.5 billion in March 2017. The outcome mainly reflected decreases in the central bank’s holding of Treasury bills and Treasury notes, largely arising from the aforementioned off-loading of the securities by RBM on commercial banks,” RBM says.

Specifically, RBM’s holdings of Treasury bills and Treasury notes decreased by K14.8 billion and K11.2 billion to K45.2 billion and K497.7 billion as at end-March 2018, respectively.

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