The Bankers Association of Malawi (BAM), a grouping of commercial banks, says it expects interest rates for both loans and deposits to improve in view of a favourable economic environment.
In July this year, the Reserve Bank of Malawi (RBM) reduced the policy rate by 400 basis points from 22 percent to 18 percent and banks reduced their lending rates to an average base lending rate of 26.5 percent and the weighted interest on deposits standing at eight percent.
But responding to a written questionnaire, BAM chief executive officer Violette Santhe said while commercial banks are all under BAM, they have to make distinct decisions that make commercial sense with their respective institutions; hence, respond differently to changes in the RBM policy rate.
“Despite the high cost of funds within the banking industry, interest rate spreads have reduced progressively since 2013. The average rate is currently at 26.5 percent. This simply shows how committed the banks are to serve their customers” she said.
In an earlier interview, RBM spokesperson Mbane Ngwira said while banks have lowered their lending rates, it is desired that the rate on deposits should be above the inflation rate so that ordinary customers realise value for their money.
The inflation rate has been on a downward spiral for the past 12 months and as of August 2017, it hit a single digit rate of 9.3 percent, the first time in six years. ■