Annual private sector credit demand declines, says RBM

 The Reseve Bank of Malawi (RBM) says annual growth in private sector credit decelerated to 21.7 percent in September 2021 from 25.3 percent in August 2021.

However, on a monthly basis, the stock of private sector credit expanded by K21.7 billion or 2.8 percent, to K806.1 billion in the review month.

This follows another increase of K8.5 billion or 1.1 percent, in the previous month.

In its September 2021 Monthly Economic Review, RBM said that the monthly increase in private sector credit partly reflected seasonal loans following implementation of the multi-billion kwacha Affordable Inputs Programme.

Reads the review in part: “This development was largely explained by commercial and industrial loans and household loans which increased by K27.9 billion and K1 billion, respectively.

“The expansionary effect was partially offset by net repayments of K4.4 billion and K882.9 million recorded in foreign currency loans and mortgages, respectively.”

In terms of economic sectors, the report further shows that private sector credit increased in the community, social and personal services K14.9 billion); manufacturing (K12.3 billion); transport, storage and communications (K2.1 billion) and restaurants and hotels (K1.5 billion); financial services (K864.9 million) and construction (K236.5 million) sectors.

Meanwhile, wholesale and retail trade, agriculture, forestry, fishing and hunting, electricity, gas, water and energy, mining and quary and real estate sectors recorded net repayments of K6.5 billion, K1.9 billion, K956.4 million, K694 million and K320.7 million in the review month, respectively.

Accordingly, the community, social and personal services sector continued to hold the largest share of outstanding private sector credit at 31.4 percent followed by the wholesale and retail trade at 20.9 percent, agriculture, forestry, fishing and hunting at 16.8 percent and manufacturing at 13.4 percent.

Consumers Association of Malawi executive director John Kapito said in an interview yesterday that faced by the challenging macroeconomic environment, consumers are being forced to seek relief from commercial banks, a development he said has pushed up the demand for personal loans.

He said: “Most of the consumers are borrowing for consumption. Our key economic drivers are not performing well to boost economic activities.”

In an interview, Bankers Association of Malawi executive director Lyness Nkungula said banks expect credit demand to rise as economic activity picks up across the globe largely due to the easing of Covid-19 travel restrictions.

“Domestic and global economic agents are adapting to new ways of doing business in the midst of the pandemic which is further boosting economic activity.”