Credit to industrial sector improves, shows report
Local banks’ extension of credit to industrial and commercial activities increased in May and June, according to Reserve Bank of Malawi (RBM).
But despite this increase, the RBM Monthly Economic Report for June 2024 shows that more credit is still tilting towards the public sector that includes the central government and State- owned enterprises, which hold a stock of K4.8 trillion against the private sector’s K1.4 trillion.
Reads the report in part: “Monthly, the stock of private sector credit increased by K105.2 billion [4.3 percent] to K1.4 trillion at the end of the month, primarily driven by increases in commercial and industrial loans, individual household loans and mortgages of K68.8 billion, K31.4 billion and K5.2 billion, respectively.”
In terms of economic sectors, the central bank reports that expansions were recorded in manufacturing, which received K47.2 billion while agriculture, forestry, fishing and hunting received K28.4 billion.
With government’s continued appetite for borrowing, trade and economic experts have expressed concerns over low credit to industrial sector, which needs expansion through new investments.
In a written response on Sunday, Ministry of Trade and Industry Principal Secretary Christina Zakeyu said high interest rates and tough credit conditions by commercial banks are some of the factors hindering the growth of the industrial sector.
“Commercial banks are not complementary enough to support the growth of industries,” she said.
National Association of Small and Medium Enterprises national coordinator William Mwale said in an interview on Sunday that access to finance is still a big challenge that constrains small businesses growth.
He said there is need for a policy that provides low interest loans for start-ups and SMEs, which currently have to compete on equal footing with large enterprises.
Said Mwale: “We recommended special rates for SMEs because at the moment, they have to compete with big corporations at the same rates or even higher.
“This is limiting their growth because they cannot access financing easily. How does the industry grow if the SMEs do not grow?”
Standard Bank plc chief executive officer Phillip Madinga, in an earlier interview, admitted that it was high time the banking industry begun to channel more credit to the industry, especially the agricultural sector and SMEs to grow the economy.
He said his bank’s new strategic direction puts special emphasis on SMEs to nurture their growth for sustainable and inclusive economic growth
