Malawians will have to wait a little longer before they can start enjoying cheaper and varied borrowing rates from the banking sector eight days after the Reserve Bank of Malawi (RBM) announced a cut in the policy rate from 18 to 16 percent.
Most banks are yet to respond to the monetary policy stance taken by RBM and those that have, say the new rates will only become effective in January next year.
Both National Bank of Malawi (NBM) and Standard Bank Malawi have set their base lending rates at 23 percent from 25 percent but to become effective on January 1 in the case of NBM and January 2, for Standard Bank customers.
Responding to our questions on the delay to effect the new rates, RBM said while setting a time limit may be desirable to borrowers, it may not bring similar advantages to other stakeholders, hence may not be in the national interest.
RBM spokesperson, Mbane Ngwira, said all monetary policy formulated and implemented by RBM, is always in the best interest of the nation at any point.
“Any interest rate decision is meant to safeguard the interests of depositors, borrowers, the payment system and the nationally agreed growth strategy.
Consequently, there will always be a balance between individual group needs against the national interest,” he said.
But entrepreneur and former President of the Malawi Confederation of Chambers of Commerce and Industry (MCCCI), Newton Kambala, said it is unfortunate that RBM is failing to regulate the banking sector leading them [banks] to make their individual decisions that are not to the benefit of consumers.
Kambala said there is need for all players to work together to drive growth where everyone benefits.
“It’s unfortunate that only one sector is prospering while all the other sectors are dying,” he said.
Blantyre-based economist, Colleen Kalua, said interest rates above 20 percent are still unattractive, especially to Small and Medium Enterprises (SMEs) who are key to the economic growth of any country.
Kalua said such a trend is worrying coming at a time when unreliable power supply has affected large corporates, leaving the country to look more to SMEs to drive economic prosperity.
“The spread is still too wide and it is unlikely that people will go to borrow from banks with such interest rates,” he said.
But Bam president, Paul Guta, has justified the delay indicating that banks are continuously making their own individual assessment of the business environment without necessarily relying on RBM only to inform their decisions.
Guta further dismissed claims that banks are following price leadership collusion when setting interest rates, where one firm serves as an industry leader and sets prices, while other firms raise and lower their prices to match.
“There is always independence when setting interest rates and the fact that banks have not yet moved is not an issue for discussion. This is the festive season but we have to commend those banks that have already made adjustments to their lending rates,” he said.
Earlier, the Competition and Fair Trading Commission (CFTC) indicated that it will continue monitoring banks for any indications of anti-competitive behaviour when setting interest rates.
CFTC said going forward; it expects more flexibility from the banking sector when responding to the bank rate.
The commission said this after a study it commissioned found that commercial banks are following price leadership collusion when setting interest rates.
The study was conducted by Chancellor College professor of economics, Ben Kalua and Gowokani Chirwa and involved an analysis of the conduct and performance of six licensed banks over a period of nine years from January 2005 to March 2014.
In a separate interview, President of the MCCCI, Karl Chokotho, said the cost of finance is not the most immediate obstacle needing resolution after it was rated as the ninth obstacle in the Business Climate Survey.
Chokotho said it is lack of reliable power supply that is killing businesses at the moment.
“Availability of electricity is the main driver for business decisions today. Capital can become cheaper but without power to run the businesses to be invested in, industry may still not access the capital,” he said.
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