Key Business Points
- Private sector credit in Malawi is growing rapidly, with a 48.5% year-on-year increase in November 2025, but the majority of this credit is flowing into households and consumption-oriented services.
- Productive sectors such as agriculture, manufacturing, and wholesale and retail trade are losing ground, with credit contracting by 19.6%, 19.9%, and 11.3% respectively, which could hinder export growth, job creation, and industrialisation under Malawi 2063.
- High lending rates and strict collateral requirements are major barriers to access to credit for small and medium-sized enterprises (SMEs), with lending rates higher than those in neighbouring countries and collateral requirements of up to 150% of the loan value.
The rapid growth of private sector credit in Malawi has raised concerns about the quality and productivity of the country’s credit boom. While the Reserve Bank of Malawi (RBM) data shows a significant increase in credit, much of it is flowing into households and consumption-oriented services, rather than key productive sectors. This has led to concerns that the country’s development needs are not being met, and that the credit boom may not be sustainable in the long term.
The Chamber for Small and Medium Businesses Association has warned that high lending rates and strict collateral requirements are pushing productive firms to the margins. James Chiutsi, the association’s executive secretary, noted that lending rates play a huge role in business decision-making, and that Malawi’s rates are higher than those of neighbouring countries. This raises production costs and affects pricing, making it difficult for SMEs to access credit.
The Economics Association of Malawi (Ecama) has also cautioned that commercial banks are increasingly shifting away from private sector lending towards government securities, crowding out productive investment. Bertha Bangara-Chikadza, Ecama’s president, warned that excessive exposure to government debt poses financial stability risks, and that the shift away from private sector credit weakens the economy and sets growth on a downward path.
A recent policy note by the World Bank and United Nations in Malawi has reinforced these concerns, noting that loans to government now account for nearly 80% of total domestic credit, up from about 30% a decade ago. The report recommends urgent fiscal discipline to slow domestic borrowing, reforms to development finance institutions, and stronger use of movable collateral systems to unlock lending for productive sectors. This is a wake-up call for Malawian entrepreneurs to advocate for policy changes that support mkandawire, or entrepreneurship, and kugwira ntchito, or job creation, in the country.
In order to address these challenges, it is essential to promote uziranji, or savings, and chipika, or investment, in productive sectors. This can be achieved by providing mikandawiro, or incentives, to businesses that invest in key sectors, and by implementing policies that support malipiro, or growth, and kulima, or development. By doing so, Malawi can ensure that its credit boom is sustainable and benefits the entire economy, rather than just a few individuals or sectors.
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