Commercial banks’ extension of credit to the private sector improved to 48.9 percent in the third quarter (Q3) of 2025 from 26.3 percent in Q2, which experts have attributed to seasonal trends and banks’ willingness to lend to firms.
In the corresponding period in 2024, according to the Reserve Bank of Malawi (RBM) Financial and Economic Review for Q3, the sector recorded 24.2 percent credit access, a year-on-year increase of 24.7 percentage points.
Data contained in the report show that the private sector credit stood at K2.2 trillion in the quarter with expansions being registered in manufacturing, wholesale and retail, community, social and personal services, agriculture, forestry, fishing and hunting among others.
Meanwhile, total credit from the banking system to the domestic economy increased to K10.6 trillion from K9.4 trillion driven by expansions in credit to the central government, private sector and public non-financial corporations.
The report further indicates that government deposits with the banks improved during the quarter with increased inflow of donor funding, which reduced its net credit during the quarter while boosting private sector credit access.
Reads the report in part: “Government increased its deposits at the commercial banks by K37.9 billion and repaid its loans with commercial banks by K37.9 billion and K20.9 billion, which slightly contracted net credit to the government.
“The government deposits increased by K142 billion on account of the receipt of funds from developmental partners earmarked for various government projects, which partially counteracted the expansion of credit to the government.”
Nevertheless, the public sector’s indebtedness to the banking system expanded by K941.5 billion to K8.2 trillion in the quarter under review with central government accounting for K7.6 trillion.
In an interview yesterday, economist Gilbert Kachamba said the growth in private sector credit suggests that banks are now apprehensive about lending to government after looking at how much domestic debt has ballooned over the past couple of years.
“They would rather lend to the private sector now and they can afford to take on a bit of risk since they are sitting on healthy levels of liquidity,” he said.
Financial market analyst Brian Kampanje described the increased private sector credit as positive, observing the trend of improved credit access by key sectors sucha as manufacturing.
“There is, however, a positive trajectory in the manufacturing sector as credit increased from 20.7 percent of the total lending to the private sector to 23.6 percent in Q.3,” he said.
Speaking at its Investor Day in Lilongwe earlier this year, Standard Bank plc head of personal and private banking Charity Mughogho said although the bank lends significantly to government, its K400 billion loan book also consists of considerable customer loans to ensure it balances up.
Earlier this year, RBM Governor MacDonald Mafuta Mwale said credit reporting and asset-based lending is expected to accelerate private sector credit access through borrowing using movable assets.
He said the credit reporting and asset based lending campaign which the bank is implementing this year wants to address the access to capital challenges, saying when people borrow using movable capital like livestock or vehicles, most enterprises can borrow and boost production.
