A Lilongwe-based banker has said there is more room for players in the financial sector to further adjust their lending rates in the wake of a favourable economic turnaround in the country.
The banker has also lamented the prevailing status quo, where deposit rates offered by banks continue to be way below the headline inflation rate which he said is discouraging more Malawians from saving their income for the long term.
This week, two biggest banks, namely National Bank of Malawi and Standard Bank, announced the revision of base lending rates to 36 and 35 percent respectively from around 40 percent, followed by Indebank,NBS Bank and Leasing and Finance Bank.
“It is a welcome development yes for banks to start revising downwards the rates but it is a fact that there is a lot more that our banks can do to improve their.
“Currently inflation is hovering around 23 percent when deposit rate are averaging five percent. This in essence means depositors are losing out and only save their money for short term for consumption,” said the banker, who opted for anonymity.
The banker, who works for one of the biggest banks in the Capital City, said when deposit rates are below inflation rate, depositors simply lose out their capital and that money is only saved in the banks for shorter term purposes.
Currently, headline inflation rate for December 2013 stands at 23.5 percent an increase from 22.9 percent in November 2013, according to the National Statistical Office (NSO).
He added: “In that case, money is saved for consumption and since we are a net importer, these deposits are only used for importing foreign goods which affects our foreign exchange position.”
The banking experts also said he believes the huge gap between lending and deposit rates in the country also knows as interest rate spread is fueling poverty levels and inequalities in the country as low income earners are bearing the brunt of high inflation-the rate at which prices of goods and services change in an economy.
Reserve Bank of Malawi (RBM) spokesperson Mbane Ngwira said in an interview yesterday that RBM recognises there are still inefficiencies in the financial system that drive interest rates up.
Said Ngwira: “RBM will not relent in efforts to ensure that inflation is kept at sustainable levels. We shall always work towards eradicating inefficiencies in the financial system.”
Last week, RBM’s Monetary Policy Committee (MPC) resolved to maintain policy rate or bank rate at 25 percent citing inflationary pressures emanating from fiscal pressures during the forthcoming election.