The Indigenous Businesses Association of Malawi (Ibam) has said it is optimistic of improved business activities in 2018.
Ibam president, Mike Mlombwa, said improved macroeconomic fundamentals, coupled with policy changes, could work in favour of the indigenous businessperson in 2018.
Among others, 2017 saw inflation falling to a five-year low of 7.7 percent while the Reserve Bank of Malawi reduced the policy rate four times, from 27 percent to 16 percent.
The policy rate reduction has seen commercial banks cutting the base lending rates to an average of 23 percent.
In addition, 2017 saw Parliament passing an amendment of the Procurement Act which demands that the government should be buying 60 percent of goods from indigenous Malawians.
Mlombwa said 2017 has laid a solid foundation for the development of the indigenous businessperson.
“It is our hope that authorities will continue working on reducing inflation so that the cost of borrowing continues going down.
“We believe that, by having low interest rates, the indigenous Malawian businessperson will be able to borrow money from the banks to boost their businesses,” Mlombwa said.
He said Ibam will continue lobbying for the implementation of the in duplum rule which puts a cap on the amount of money a borrower could pay in an event of a default.
The in duplum rule is a Common Law rule that provides that arrear interest ceases to accrue once the sum of the unpaid (accrued) interest equals the amount of capital outstanding at the time and not the amount of capital originally advanced.
“Many borrowers are paying through the nose in the event of a default. You find that a borrower has obtained a loan of K10 million, pays back K20 million but still remains with K40 million to pay simply because he defaulted at some point in time due to unforeseen circumstances.
“We believe this is unfair and that there is need to put a cap on interest that can accrue on a bad debt,” Mlombwa said.
The Ibam chief also expressed hope that Malawi would not experience a repeat of the power challenges that choked business in 2017.
“We understand energy authorities are in the process of bringing in generators. We hope that this will be expedited so that businesses do not spend most of their time idle,” he said.
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