Individual loans on the rise, RBM figures show

Individual loans on the rise, RBM figures show

Post was last updated: May 24, 2023

Individual household loans increased by K10.7 billion in March, reflecting commercial banks, deliberate actions to grow their retail loan books, particularly the salary-based loans, Reserve Bank of Malawi (RBM) data  shows.

However, during the review period, the stock of private sector credit declined while provision for bad loans for private sector credit worsened from 4.5 in February to 5.3 percent in March.

Reads the RBM March 2023 Monthly Economic Report: “On a month-on-month basis, however, the stock of private sector credit decreased by K6.7 billion to K1 trillion.

“This was explained by net repayments of foreign currency denominated loans, mortgages and commercial and industrial loans of K14.5 billion, K5.3 billion and K3.9 billion, respectively.”

In terms of economic sectors, contractions in outstanding credit were recorded in manufacturing (K11.6 billion); wholesale and retail trade (K2.9 billion); restaurants and hotels (K1.5 billion); construction (K1.3 billion) and real estate (K356.1 million).

Tchereni: These loans are fuelling inflation

Commenting on the rising individual loans, Malawi University of Business and Applied Sciences associate professor of economics Betchani Tchereni said the increase in the individual loans needed to be accompanied by an increase in the loans to the manufacturing sector.

He said: “Actually, it is these loans to salaried employees which are fuelling inflation through importation of commodities.

“When these loans have been grabbed, the next step is demand for foreign exchange because the people want to buy imported appliances.”

Malawi Confederation of Chambers of Commerce and Industry president Lekani Katandula in an interview described the trend as a fair reflection of the country’s diminished manufacturing sector as there is so much reliance on imports.

“As a country, we need deliberate measures to reverse this trend and grow our manufacturing sector,” he said.

Katandula, who is also Illovo Sugar (Malawi) plc managing director, said appropriate tax measures and exchange rates that discourage unnecessary imports coupled with improved electricity supply could be a good starting point to resuscitate local production.

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