Malawi’s private sector credit is expanding at its fastest pace in years. But a closer look at where the money is going suggests a troubling disconnect between headline growth and the country’s development needs.
Reserve Bank of Malawi (RBM) data shows that private sector credit grew by 48.5 percent year-on-year in November 2025, up from 41.5 percent in October and more than double the 20.8 percent recorded a year earlier. On a month-on-month basis, banks extended an additional K88.1 billion, pushing total private sector credit to about K2.2 trillion.
The numbers suggest a banking system that is lending aggressively. In reality, much of that credit is flowing into households and consumption-oriented services, while key productive sectors are losing ground.
RBM figures show that lending to the community, social and personal services sector rose sharply in November, pushing its share of total outstanding credit to 40 percent—the largest of any sector. Individual household loans also drove much of the monthly increase.
By contrast, credit contracted in agriculture (19.6 percent), manufacturing (19.9 percent), as well as wholesale and retail trade (11.3 percent)—the very sectors expected to anchor export growth, job creation and industrialisation under Malawi 2063.
The shift raises questions about the quality and productivity of Malawi’s credit boom.
Chamber for Small and Medium Businesses Association executive secretary James Chiutsi said high lending rates and strict collateral requirements are pushing productive firms to the margins.
“Lending rates play a huge role in business decision-making,” Chiutsi said. “Our rates are higher than those of neighbouring countries, which raises production costs and affects pricing.”
He said while banks offer better rates than informal lenders, access remains constrained. “Collateral is the biggest barrier. In some cases, banks want collateral worth 120 or even 150 percent of the loan value. That puts most SMEs off,” Chiutsi said.
In an earlier interview, the Economics Association of Malawi (Ecama) president Bertha Bangara-Chikadza cautioned that commercial banks are increasingly shifting away from private sector lending towards government securities, crowding out productive investment.
“This reduces the flow of credit to sectors like agriculture, manufacturing and SMEs, slowing job creation and long-term growth,” she said in an earlier interview.
Ecama also warned that excessive exposure to government debt poses financial stability risks. “If government borrowing is mainly financing recurrent expenditure, the shift away from private sector credit weakens the economy and sets growth on a downward path,” the association said.
A recent policy note by the World Bank and United Nations in Malawi reinforces these concerns. Titled ‘No Time to Waste: Policy Priorities for Malawi’s Recovery’, the report notes that loans to government now account for nearly 80 percent of total domestic credit, up from about 30 percent a decade ago.
High inflation—currently keeping the RBM policy rate at 26 percent—has raised borrowing costs and encouraged banks to favour government paper over private clients. The result is short-term, expensive credit that supports trading and consumption rather than long-term investment.
The policy note 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.
