Africa-Press – Malawi. Commercial banks advancement of credit facilities towards the private sector in the country increased by 5.3 percent to K1.04 trillion during the third quarter of the year from K990.8 billion in the second quarter.
This is according to a Reserve Bank of Malawi Monetary Policy Committee (MPC) report issued after fourth MPC meeting. According to the report, year-on-year, private sector credit edged up by 24.4 percent by the second month of the third quarter from 19.4 percent.
However, the concentration of credit remained in the unproductive sectors of community, social and personal services at 30.0 percent representing K312.6 billion of gross loans, followed by the wholesale and retail trade at 22.0 percent representing K229.7 billion.
The backbone of the Malawi economy, agriculture, came third at 17.5 percent representing K182.2 billion while manufacturing was not in the group of top concentrated sectors despite its needed essential contribution to the growth of the economy.
“These three sectors held a combined total of 69.5 percent of total credit as at the end of the third quarter this year,” the report reads.
Malawi Confederation of Chambers of Commerce and Industry President Lekani Katandula said, for a long time, credit to the private sector has been channelled towards consumption and not manufacturing.
“The country lacks enough development to push private sector consumption of loans especially to growth-inducing sectors such as manufacturing. The government’s appetite for borrowing, which continues to grow, also reduces private sector credit basket,” he said.
Access to loans is projected to slow down following last month’s upward adjustment of the policy rate to 18 percent from 14 percent in an attempt to contain skyrocketing inflation.
Financial Market Dealers Association President Leslie Fatch said while the decision is good to contain inflation, it will dwindle demand for credit from commercial banks that will raise interest rates.
“The challenge is that if we pursue that line so much as an economy without taking into account the welfare of citizens, interest rate increases become detrimental,” Fatch said.
In most healthy economies, most credit is channelled towards manufacturing, which tickles the economy. Justin Mkweu is a fast growing reporter who currently works with Times Group on the business desk. He is however flexible as he also writes about current affairs and national issues.
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