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Saulos Chilima lambasts commercial banks

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KAWAWA—Government should reduce its appetite for borrowing

Vice President Saulos Chilima has said commercial banks in the country are not doing enough in providing financing to individuals and businesses that would translate in growth of the economy.

Chilima, who is also Minister of Economic Planning, said this over the weekend during a consultation meeting with stakeholders on Covid social economic recovery plan.

The Vice President said commercial banks have centred on trading in treasury bills and foreign exchange, resulting in huge profits for them but little development for the country.

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“We need the banks to start lending to businesses not just Treasury. Banks’ core business is lending and you (banks) should be customer-centric and not profit and bonus-centric,” Chilima said.

During the 2021 Economics Association of Malawi Annual Conference, Chilima also said shallowness of financial markets and limited financial mobilisation stand in the way of industrial development.

He said lending rates are still too high for investment.

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“Commercial banks are making supernormal profits from short-term government securities while shying away from long-term investments in the real sector including industrial development. Even then, whenever the monetary authorities adjust the policy rate, banks will respond by lowering the deposit rates more than the lending rate,” Chilima said.

A business environment assessment for 2021 by the Malawi Confederation of Chambers of Commerce and Industry shows that lack of access to finance was among top challenges facing the private sector.

The report indicates that the problem was not only for last year but even in the past where financial institutions have not been able to fund ideas for business startups or businesses for recapitalisation.

In an earlier interview, Bankers Association of Malawi (Bam) President McFussy Kawawa said banks are also concerned with the trend but it was not of their making.

He said lending to the government is a result of its appetite for borrowing; therefore, if it reduces its appetite, money will be channeled towards other sectors.

“We are in business but, going forward, we are devising ways of channeling the funds into the productive sector,” Kawawa said.

Bam Chief Executive Officer Lyness Nkungula reiterated Kawawa’s sentiments, saying banks lend to all clients and would continue to do so.

She said since the banking system is evolving every day, diversity of products is a necessary tool for them to be relevant both on domestic and international markets.

Market analyst Cosmas Chigwe said trading in Treasury bills rather than businesses has more to do with security of the funds rather than profit making.

“There is more risk in individuals and businesses than in government and that is why banks lend more to government because, in terms of profit making, it is more profitable to lend to businesses than to government,” Chigwe said.

The consultation meetings, which will form a plan for the economic recovery amidst the Covid pandemic, are expected to continue this week.

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