Malawi Banking sector under pressure because of Covid-19

Post was last updated: May 14, 2020

NGWENYA—It is very difficult to predict

Banks in the country say they are not spared from possible effects of the Covid-19 pandemic, saying the future of the industry, which is deemed most resilient, remains mixed and murky.

In an interview Tuesday, Bankers Association of Malawi (Bam) president, Kwanele Ngwenya, said performance of the banking business heavily depends other sectors of the economy, which have been hit hard by effects of the pandemic.

“As long as business in general is struggling, it exerts pressure on the banking industry.

“It is very difficult to predict what 2020 will look like as we have seen that the GDP growth has been revised downwards from 5 percent to 1 percent and the economy continues to receive pressure from the lockdown of major trading partners,” Ngwenya said.

He was speaking when asked to comment on performance of the industry in line with the 2019 Annual Report issued by the Reserve Bank of Malawi Tuesday.

For instance, in the year under review, the banking sector recorded core and total capital ratios at 17.0 and 21.0 percent, which were above the regulatory requirement of 10 and 15 percent, respectively.

“The sector continued to be profitable, registering a significant growth in aggregate after tax profit of K59.2 billion from K43.7 billion in 2018.

“Total net assets increased by 13 percent to K1.8 trillion during the year due to increase in loans as well as growth in investments,” reads the report in part.

Institute of Bankers Chief Executive Officer, Lyness Nkungula, said despite the outcome, the industry did not anticipate the new interest rate regime (reference rate) which dropped, implying lower yields for investments and lending business.

She said due to elections in 2019, there was a slowdown in economic activity, particularly investments which dampened demand for banking services.

“The outlook for 2020 is not great; first continuation of politicking and business disruption will continue to affect business and Covid-19 has slowed down economic activity globally and domestically,” Nkungula said.

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