Trade Minister laments high interest rates
Minister of Industry and Trade Joseph Mwanamvekha on Wednesday complained that interest rates being charged by commercial banks and other lending institutions are currently too high.
Commercial banks’ base lending rates are ranging between 37 percent and 39.5 percent despite Reserve Bank of Malawi (RBM) policy rate or bank lending rate settling at 25 percent.
But Mwanamvekha, speaking during a 2015 high level forum on development effectiveness in Lilongwe, worried that at around 40 percent, interest rates are ‘very high’ and are prohibiting many Malawians access to finance.
Mwanamvekha was speaking on a session that required Cabinet ministers to provide specific interventions on effective financing and partnerships for development in Malawi.
Said the minister: “One of the greatest challenges at the moment is that interest rates are too high and this is leading to poor access to finance.”
The minister’s statement comes amidst a general outcry that prevailing high interest rates are lowering private sector activity and resulting in a decrease in capital investments.
And in recent months, high interest rates have led to massive default rates on loan facilities with increased cases of bank repossessing houses belonging to loan defaulters.
“That is why macroeconomic stability comes out in front and we need to make sure that interest rates are reduced. But perhaps we need a collective approach to reduce interest rates,” said Mwanamvekha.
But he hoped that the creation of a development bank by government will offer solutions to long-term lending as opposed to the current preference and obsession by commercial banks in short-term lending.
During the recent Malawi Investment Forum (MIF), the local private sector, led by the Malawi Confederation of Chambers of Commerce and Industry (MCCCI) chief executive officer Chancellor Kaferapanjira, said lack of access to finance as a result of high interest rates is hitting their members hard.
Reacting to the complaints, president of Bankers Association of Malawi (Bam) Misheck Esau said they sympathise with the business community on the prevailing high cost of doing business emanating from high lending rates.
However, he stated that the biggest source of high interest rates in Malawi is the prevailing high level of inflation at 19.5 percent, which is linked to government spending.
“At the current levels of interest rates, it is very difficult to survive as a business,” said Esau.
