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Wholesale, retail trade credit lead

Total credit for wholesale and retail trade led in October 2014, with the sector claiming about 25 percent of the total private sector’s debts, way ahead of agriculture and manufacturing, which are principal drivers of economic growth and employment.

Data from the Reserve Bank of Malawi (RBM) show that while wholesale and retail trade accounted for a quarter of total credit in December 2014, agriculture, the main driver and sector that contributes over 30 percent of gross domestic product (GDP), wires in over 80 percent of foreign exchange and employs about 90 percent of the workforce, claimed 20 percent of credit.

Reserve Bank of Malawi
Reserve Bank of Malawi

Manufacturing, a sector that creates employment and builds forward and backward linkages, claimed only 15.5 percent while transport sector took up 11.4 percent of total credit, according to the data.

Supported by the agriculture sector, specifically tobacco exports, economic growth for 2015 is projected at between 4.5 percent and six percent.

However, government said last year, buoyed by robust growth in information and communication, electricity, gas and water and mining, the economy grew by about six percent, 0.3 percentage points lower than the 6.3 percent growth rate achieved in 2013.

Economists and analysts have often argued that Malawi’s credit favours non productive sectors, urging the money market to pay attention to key drivers of economic growth, including agriculture and manufacturing.

Other analysts have argued that the market allocates finance to sectors based on profitability and risk.

According to the figures, regardless of the high prevailing lending rates, total net lending to the domestic sector—both private and public—rose by K7.9 billion to K517.4 billion in October 2014.

Authorities have attributed the growth in net lending to private sector that borrowed about K17.2 billion while credit to the public sector fell, declining by about K9.3 billion in the month.

Specifically, the stock of outstanding credit to the private sector grew by K17.2 billion to K288 billion in the month from K270.9 billion the preceding month with the bulk, amounting to K6.2 billion, being extended to individuals and households, particularly small-scale businesses.

According to data, individual loans were followed by wholesale and retail trade sector, whose outstanding loans increased by K5 billion during the month under review.n

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