Revitalizing Malawi’s Economy: Opportunities Abound as Reference Rate Drops to 25.2% – A Game Changer for Business Growth

Key Business Points

• Commercial banks in Malawi have reduced the reference rate to 25.2 percent, a 0.1 percentage point decline from 25.3 percent in December 2025, which may slightly ease loan servicing for clients.
• The reference rate cut is largely technical, driven by a reduction in the all-type Treasury Bill rate, rather than a reflection of changing market conditions, according to Financial Market Dealers Association (Fimda) President Leslie Fatch.
• Future movements in the reference rate will depend on key components, including the Lombard rate and the overnight interbank rate, which are influenced by the policy rate and liquidity levels in the banking system.

The reduction in the commercial bank reference rate is expected to have a modest impact on loan pricing and credit costs for businesses and individuals in Malawi. According to Bankers Association of Malawi President Philip Madinga, the reference rate cut signals a slight easing in cost-of-funds and market conditions. However, Fatch noted that actual market rates remained unchanged during the month, indicating that the drop was more technical than a reflection of changing market conditions.

The reference rate, which serves as a benchmark for loan pricing, is calculated based on several components, including the Lombard rate, the overnight interbank rate, and the all-type Treasury Bill rate. The Lombard rate carries the biggest weight, at 64.8 percent, followed by the overnight interbank rate at 25 percent, and the all-type Treasury Bill rate at 10 percent. As such, movements in these components will continue to influence the reference rate.

Throughout 2025, Malawi’s commercial bank reference rate fluctuated slightly, remaining elevated and ranging from 25.10 percent to 25.40 percent. The rate was adjusted upwards to 25.40 percent in August, before easing to 25.30 percent in September, where it remained for the rest of the year. The Monetary Policy Committee of the Reserve Bank of Malawi maintained the policy rate at 26 percent throughout 2025, reflecting a tight monetary stance aimed at stabilising the economy amid persistent challenges, including high inflation.

For businesses and entrepreneurs in Malawi, understanding the reference rate and its components is crucial for making informed decisions about loan financing and investment opportunities. As Fatch noted, the reference rate will continue to depend on key components, including the Lombard rate and the overnight interbank rate. As such, businesses should keep a close eye on these components and their impact on the reference rate, as they navigate the zinthu zophwanya (market conditions) and make decisions about kujitengelera ndi masamba (accessing credit facilities).

Source Link

What are your thoughts on this business development? Share your insights and remember to follow us on Facebook and Twitter for the latest Malawi business news and opportunities. Visit us daily for comprehensive coverage of Malawi’s business landscape.