Credit spread under scrutiny
Malawi Confederation of Chambers of Commerce and Industry (MCCCI) has faulted the country’s credit structure which it says is concentrated towards credit to the wholesale and retail sectors unlike productive sectors.
This, according to the Chamber, is a cause for concern as it undermines the country’s potential to achieve meaningful economic development,
MCCCI in its 2021 Business Environment Assessment published last week notes that though demand for credit by the private sector was high in 2021 compared to 2020, credit channelled to the manufacturing sector remained relatively low compared to other sectors.
Said the MCCCI: “This no doubt undermined the recovery of the economy as production is key in encouraging recovery of the labour market as well as stimulating real economic transactions in the domestic economy.”
According to the Reserve Bank of Malawi (RBM), annual private sector credit growth was recorded at 21.7 percent in the third quarter of 2021; 27 percent in the second quarter of 2021 and 18.9 percent in the first quarter of 2021.
This compared to 2020 is an improvement as annual private sector credit growth than was recorded at 16.4 percent in the third quarter, 12.8 percent in the second quarter and 23.8 percent in the first quarter.
However, a Business News analysis indicates that in 2021 wholesale and retail trade sectors continued to represent the largest share of the total private sector credit.
RBM October Monthly Economic Review Report shows that in terms of economic sectors, private
sector credit expanded in the wholesale and retail trade to K16.8 billion followed by financial services at k5 billion, construction at K3.6 billion, transport, storage and communications K563.5 million and restaurants and hotels K437.9 million.
In contrast, the manufacturing, agriculture, forestry, fishing and hunting and electricity, gas, water and energy sectors recorded net repayments of K2.7 billion, K2.5 billion and K964.8 million respectively .
Economists Association of Malawi (Ecama) president Lauryn Nyasulu is also on record as having said that it is important that sectors with the highest growth and productive in nature get credit.
“Credit growth in productive sectors is a positive development. As a country we need to invest sufficiently in infrastructural services such as electricity, water, irrigation, manufacturing and transportation to efficiently facilitate economic growth and development
