The Shylocks of Malawi
The Nutcracker first watched William Shakespeare’s play called The Merchant of Venice while in Form One at HHI Secondary school. This play was part of compulsory reading for those that were getting ready to sit for Malawi School Certificate of Education examinations in 1986.
This was when he was introduced to the character of “Shylock”. This gentleman loaned money to a character known as Antonia, who, incidentally, was his rival. The security for the loan was a pound of fresh, Antonio’s fresh. The choice of this type of security was motivated by a sense of revenge for the ills Antonio has committed against Shylock.
It is said in the play that Antonio previously physically assaulted him, spat on him and insulted him. Sometimes, one gets the sense that banks in Malawi fit this description. This column has been writing about the high interest rates that commercial banks charge. They are exorbitant and cannot be explained by inflation or unstable economic conditions. Seriously, how does one explain the difference between Malawi and it neighbours.
The lending rates in the countries around us and the major trading partners in Africa are very different from Malawi. It is not only the level of interest rates that is worrying but the difference between the deposit and loan rates is not the only concern.
Banks in Malawi have a tendency to charge for everything. They charge customers, in terms of fees, but they have even taken on the habit of charging customers in kind. Yes, in kind, if one believes on the saying that time is money, one can interpret the long queues in banking halls as a charge imposed on the customer. Sometimes, one thinks the banks are up to some form of revenge on their customers in Shylock style.
Why have these banks been allowed the near monopoly they enjoy in Malawi? The banks continue to rake in billions of kwacha in profits and, yet, they do not seem to be too bothered by the discontent in the people of Malawi. These gargantuan profits they make year after year cannot justify the charges to be fair. It is not my proposition that banks should not make profits. No! Banks, just like any other business, must be profitable in order to survive.
The shareholders of these banks in Malawi need a return on their investment and I, therefore, do support the idea that banks should post profits. I subscribe to the efficacy of large profits, but profits should not be usurious because, if they do, they become unconscionable. Profits need to be rational and just. Profits without morality are not in the spirit of the slogan of private sector for development.
When will Malawian banks become more responsive to the developmental needs of Malawi? This country has been good to most of them, why do they still insist on getting a pound of flesh from Malawi? I can understand any government in a free and open economy not wanting to legislate how banks should operate.
However, the government has a moral duty when banks take advantage of their oligopolistic positions to impose onerous burdens on their customers. When banks behave like Shylock, then, perhaps, someone needs to convert Shylock to Christianity.
The August 2017 RBM’s Monthly Economic Review details the lending tendencies of the central bank in Malawi. Gross credit to the private sector decreased by K11.1 billion to K392.0 billion, following another decrease amounting to K16.3 billion registered in the preceding month.
These decreases, according to the report, were recorded in commercial and industrial loans, foreign currency denominated loans and mortgages, with only individual household loans increasing. Specifically, commercial and industrial loans, foreign currency denominated loans and mortgages fell by K10.1 billion, K4.4 billion and K1.0 billion to K147.3 billion, K108.7 billion and K38.9 billion, respectively.
In contrast, individual household loans increased by K8.7 billion to K123.6 billion as at end August 2017. Of course, with high interest rates and profits, why would banks bother to lend to a farmer or a person in the micro sector when you can make money hands down by charging high rates on those you have already corralled?
The banking sector in 2016 loaned to manufacturing only 18 percent of gross loans, about 19.6 percent to agriculture compared to lending to wholesale and retail trade at 24.4 percent. Is this by accident? Can this assist in the country’s economic growth? If the truth be told, what they are trying to preserve is their oligopolistic position in the society.
Is it time for the authorities that have been hired by the electorate in this country to be the heroes and protect the economic growth of this country by ensuring that these institutions do not behave like Shylock? Antonio was finally saved by the authorities in the play The Merchant of Venice, who will take up the battle to protect Malawians from the perennially high and usurious interest rates? Who will stop the banks from asking for a pound of flesh from ordinary Malawians?
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