International Monetary Fund (IMF) has praised the country’s nine commercial banks for complying with the International Financial Reporting Standards (Ifrs9) by the International Accounting Standards Board.
Besides, the IMF Country Report indicates that the banks are adequately capitalised in line with Basel II requirements.
It also says the banks are liquid, sound and profitable and in stable condition.
A Memorandum of Economic and Financial Policies (Mefp) contained in the IMF Country Report on Malawi shows that Malawi Government authorities are committed to strengthening banking resilience and financial sector oversight.
Mepf is part of the Letter of Intent signed by Minister of Finance, Economic Planning and Development Joseph Mwanamvekha and Reserve Bank of Malawi (RBM) Governor DalitsoKabambe addressed to IMF managing director KristalinaIvanova Georgieva.
Reads the letter: “All banks are fully compliant with the Ifrs9 standards which went into effect in January 2018. We will ensure that all banks continue having adequate provisioning in line with the Ifrs9 standards and ensure that their non-performing loans [NPLs] remain within the regulatory requirement.”
Over the past two years, NPLs or bad loans have declined from 15.7 percent at end 2017 to 4.8 percent in June 2019 largely due to write-offs and loan recovery and overall growth in bank lending.
The Malawi Government informs the global lender that one small bank with a negative capital adequacy ratio recapitalise while another loss-making bank is currently looking for a partner to inject capital and may otherwise exit the market.
“We will encourage commercial banks to develop skills in the banking sector and increase financial literacy among the population.
We will further improve financial infrastructure, including facilitating mobile banking infrastructure and increasing non-bank financial intermediation.
“We will continue to increase protection of creditors’ and borrowers’ rights by improving contract enforcement,” reads the Letter of Intent.
In the same vein, the World Bank, in its Malawi Economic Monitor (MEM) released last week in Lilongwe, noted that as of June 2019, commercial banks had recorded reasonable levels of profitability and return on equity, averaging at 21.2 percent, an increase from 16.9 percent in June 2018.
Alliance Capital Limited research manager Bond Mtembezeka in an interview yesterday said that banks have in recent times intensified their efforts in ensuring that they are efficient through several initiatives, including going digital.
He said: “On profitability, it is two-fold. Of course, banks have also stepped up their efforts in making sure that they are as cost-efficient as possible through, among other things, digitising their services.”
Addressing participants during the official event marking the operationalisation of the Malawi Agricultural and Industrial Investment Corporation in Lilongwe last week, Kabambe stressed that banks are also adequately capitalised, liquid and profitable.
He said that private sector credit is also rising averaging 15.4 percent in 2019 up from 5.7 percent in 2018, adding that credit accessed through microfinance institutions has grown from K29 billion in 2016 to K46.8 billion in 2019.