Banks move to fill construction gaps
Financial institutions have renewed their commitment to long-term financing in construction to unlock the country’s infrastructure development as the current financing gap dents Malawi’s medium to long-term growth targets.
This follows revelations by the African Development Bank (AfDB) that domestically, the financial sector has not been able to play an optimal role in financial resource allocation as about 60 percent of credit is channelled to the government and only 30 percent is available for the private sector.
Of this amount, AfDB notes that 70 percent is allocated to non-productive sectors such as trading activities and on short-term basis.
Speaking at this year’s National Construction Industry Council (NCIC) International Construction Conference last week, FDH Financial Holdings Limited chief executive officer (CEO)William Mpinganjira said to develop infrastructure in line with the country’s long-term development strategy, Malawi 2063, construction sector growth must double the current 5.3 percent annual average.
In an interview, he said to achieve that, financing of construction projects must, among others, be tailored towards short-term to long-term financing.
Mpinganjira said: “We can create funds specific for such projects where you get like minded investors to put their funds and these funds can be used to finance long-term projects rather than the short-term debts which sometimes result in challenges on repayments because of delayed payments that our customers face.
“We have already successfully funded such projects like Malawi Fertiliser Company, Zomba Stadium and various roads, currently under construction.”
In a separate interview, Standard Bank plc CEO Phillip Madinga said his institution is ready to partner with others including in public private partnerships to finance big infrastructure projects such as financing of Kapichira Hydro Power Station Phase Two which shows the capacity of local banks.
He said: “Apart from the Kapichira project, the most recent that I can cite is a loan facility which we provided to the Roads Fund Administration where we are expanding the Kenyatta Drive and Mzimba Street in Lilongwe.
“Kenyata is going to be a six lane road and the other is going to be a four lane road. This is the first of its kind in Africa even for Standard bank where it is 15-year tenor facility. At the same time, we have also brought in other partners to make it more like a public private partnership.”
In a presentation on project financing, Zizwani Khonje of Nico Holdings, who is also NBS Bank plc director, said the bank puts real estate as one of its main priorities based on its background as a new building society.
Meanwhile, NCIC CEO Engineer Gerald Khonje said financing challenges have contributed to the country’s slow infrastructure development but players have been inspired by the banks’ overwhelming response and assurances.
AfDB data show that given the current inflows of financing, Malawi faces a gap of about $3.59 billion (about K6.2 trillion) or $0.63 billion (K1.1 trillion) annually to attain her development targets of 2030 and 2063, with the largest financing needs in infrastructure at 55 percent of total financing, followed by education at 30 percent.
AfDB has since called for a reform of the international financial architecture as the existing frameworks have been unable to support the mobilisation of stable and long-term financing at scale to support investments needed to combat the climate crisis and achieve the Sustainable Development Goals in Malawi in particular, and in Africa in general.
