Non-performing loans on the rise

Post was last updated: January 18, 2018

Malawi’s level of non-performing loans (NPL) remained high during a greater part of 2017, according to the Reserve Bank of Malawi (RBM).
As of July 2017, the default rate had risen to 19 percent, from 10.8 percent in December 2015.
In its December 2017 Financial Stability Report, the central bank said that the rate continued to increase across all economic sectors during the second half of 2017.
Ironically, the rise comes amid a sharp fall in interest rates in the year under review.
Majority of banks attributed the increased non-performing loans to poor agricultural commodity prices, high cost of borrowing, and continued intermittent power supply, among others.
According to RBM, an increase in the level of non-performing loans led to asset quality deterioration in a number of banks.
The wholesale and retail sector continued to remain the dominant sector with highest non-performing loans, followed by the manufacturing sector.
In the household sector, 40.0 percent of banks reported that NPLs increased on account of increased retrenchment by institutions, low commodity prices, following bumper agricultural harvest last season and high cost of borrowing.
In relation to SMEs, 50.0 percent of banks reported increased NPLs in the SMEs sector due to low agricultural commodity prices.
With regard to large enterprises, 40.0 percent of banks reported that NPLs increased in the sector.
“This was largely due to fraudulent activities by a single large multi-borrower customer. However, the slump of agricultural commodity prices, following bumper agricultural harvest and subsequent maize export ban also contributed to the increase in NPLs in this sector,” RBM said.
However, the survey findings show that majority of banks reported that demand for loans and credit lines increased between April and September 2017, similar to March 2017 survey results

Let us know what you think of this update and remember to add us on our facebook and follow us on our twitter. Make sure to come back daily for more Malawi business news updates.

Quick Links: Malawi Banking News | Malawi Technology News | Download Business eBooks | Ten Signs You Are An Entrepreneur | What is a Managing Director?

Today’s top business story: Top Commercial Banks In Malawi

Source link