Banks tout role to firms’ growth
Bankers Association of Malawi (BAM) says despite the banking sector being hit by prevailing economic challenges, they remain key to building a resilient business environment by investing in productive sectors.
BAM president Mcfussy Kawawa said this in Blantyre on Friday during the annual bankers’ dinner and dance at a time figures from the Reserve Bank of Malawi (RBM) show that the banking sector’s supply of credit to the domestic economy continues to be taken up by the public sector compared to the private sector.
The data shows that credit to the public sector rose by K131.1 billion during the second quarter (Q2) of this year, following another increase of K132.7 billion registered in the previous quarter.
But in his speech, Kawawa justified the current credit composition, which is skewed to government securities, saying banking is simply responding to credit needs in the economy.
He said: “People believe that because there is so much of the portfolio that is in government securities then it is at the cost of the productive sector, but this may not be the case.
“Government has had the appetite for borrowing and banks are providing that funding which is not at the expense of the private sector.”
Kawawa said banks are doing their part to invest in productive sectors such as manufacturing, information and communications technology, agriculture and infrastructure.
But he said growth has not been significant due to economic challenges as the country has not seen new investments that banks could be financing.
“We believe we have a role to play in building a more resilient business environment that would easily contain external shocks and subsequently recover from many unfortunate economic circumstances,” said Kawawa.
He said banks remain cautious on who to lend, as such, economic sectors need to make due diligence when engaging banks to finance their investments.
“We understand the need for us to engage those we deal with to understand their challenges and let them know our policies in the bank and make it possible for banks to play our role efficiently,” said Kawawa.
Africa Development Bank country manager Macmillan Anyanwu, who was keynote speakers, said micro and macro environment is not fair to most sectors.
But he said there remains an unfinished agenda for the financial system where banks should continue to take a leading role in business financing through provision of accessible and affordable financial services.
“As a financial industry is considered as the driver of the country’s economy, it is important that market players look beyond current chaos and reflect on lessons that have been learnt from the previous economic lessons,” said Onyanwu.
RBM data shows that private sector credit increase in Q2, were in agriculture, wholesale and retail trade and manufacturing.
