CFTC exposes poor competition among banks
The Competition and Fair Trading Commission (CFTC) has revealed that there is poor competition in the banking sector which leads to poor customer service, prohibitive interest rates and high profits.
The local competition regulator, which is a government agency, has argued that there is low competition in the sector although there are 11 commercial banks because only two banks control about half the market.
According to available figures provided by the sector’s regulator, the Reserve Bank of Malawi (RBM), the sector remains dominated by two banks—National Bank and Standard Bank—with combined assets and deposits accounting for 51.1 percent and 51.6 percent, respectively, of the entire sector as at March 2014.
Responding to an e-mail on Tuesday, CFTC executive director, Charlotte Malonda, said from a competition perspective the sector is concentrated with few players and little competition among them.
“About half of the market is either taken by National Bank or Standard Bank, which poses competition risks. The sector is highly regulated and only banks licensed in Malawi are by law allowed to operate in Malawi unlike in other non-service oriented sectors where competition is high because of imports,” said Malonda while appreciating the need for regulations in the sector.
But Bankers Association of Malawi (BAM) executive director Lyness Nkungula said on Wednesday competition in the financial sector exists and is getting stiff.
“You may want to know that despite the two mentioned commercial banks dominating the market share, we have some banks that are growing fast. The other new banks are growing and gaining market share too.
The future is bright, will be more dynamic and challenging to all banks. The emerging technologies, not only do they enhance service delivery, but also reduce barriers to entry,” said Nkungula.
Malonda, however, pointed out that as a result of the poor competition in the sector, public discussion on poor services, lack of information, high bank charges and high interest rates are rife.
Analysts have recently pointed out that banks are reluctant to reduce their lending rates although the RBM reduced the policy rate to 22.5 percent while the Lombard rate—the rate at liquidity stressed commercial banks borrow from the central bank—was reduced to 23.5 percent.
Some experts have also noted that the banking sector rakes in high profits regardless of the poor performance of the general economy.
Providing tips for the sector, the CFTC has noted that more should be done to train front line staff in customer care, come up with innovations and efficiencies to attract the unbanked public.
