Key Business Points
- Malawi’s non-performing loan (NPL) levels have exceeded the five percent regulatory threshold, indicating growing financial stress and increased credit risk.
- Small businesses, especially in the agriculture, manufacturing, and retail sectors, are struggling to meet their loan obligations due to deteriorating macroeconomic conditions.
- The rise in NPLs signals a warning sign of underlying economic weakness, calling for urgent macroeconomic stabilisation and targeted support to vulnerable sectors.
Malawi’s economy is facing a significant challenge as non-performing loan (NPL) levels continue to rise, exceeding the five percent regulatory threshold. According to the African Development Bank (AfDB) Group, NPLs rose to nine percent in October 2024 from 6.7 percent a year earlier. This trend is a major concern for the business community, as it indicates growing financial stress and increased credit risk. Chamber for Small and Medium Enterprises executive secretary James Chiutsi described the environment as "tough" for small businesses, with many failing to expand or even closing shop.
Small-scale business operators, such as Fletcher Luhanga, who owns a fast-food outlet in Blantyre, are struggling to service their loans. Luhanga took a K5 million loan from a local bank but is finding it difficult to repay due to rising food prices and shrinking capital. The high interest rates and foreign exchange shortages have hindered borrowers’ ability to meet their loan obligations, according to the Reserve Bank of Malawi’s Bank Lending Survey.
The survey also cited deteriorating macroeconomic conditions, marked by a rising inflation rate of 29.2 percent and high interest rates. Banking and financial consultant Misheck Esau noted that the economic environment has become challenging for many borrowers, who have been in a high interest rate trap since 2021. The scarcity of foreign currency has further exacerbated the problem, leading to a huge price spiral on the back of the foreign currency parallel market exchange rates.
Financial analysts and economists have called for urgent macroeconomic stabilisation and targeted support to vulnerable sectors. The rise in NPLs signals rising credit risk for banks, which may tighten lending and slow down private sector growth. The analysis of banks’ financial statements shows that a large chunk of the NPLs come from personal loans, agriculture, manufacturing, retail, and construction as well as electricity, water, and energy sectors.
The annual growth rate of private sector credit decelerated to 17.8 percent in March 2025, and the monthly growth rate increased by K1.2 billion to K1.5 trillion, primarily driven by increases in individual household loans and mortgages. As the economy struggles to recover, it is essential for businesses to adapt to the changing market conditions and seek support where necessary.
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