Banks hike lending rates, now at 13.8%

Commercial banks have hiked their base lending rates, a development analysts have attributed to the recent 25 percent devaluation of the kwacha and the impending inflation rise.

Published statements from some of the country’s commercial banks, including Standard Bank plc, CDH Investment Bank and National Bank of Malawi plc, show that their lending rates have been hiked to 13.8 percent from 13.5 percent in May.

In an interview on Saturday, economic statistician Alick Nyasulu said with the expected inflation rise, banks are positioning themselves.

Inflation rate is currently at 15.7 percent as of April 2022, according to the National Statistical Office, and there are indications that it will continue rising largely due to increase in food and non-food inflation.

Consumers Association of Malawi executive director John Kapito said the development was expected given the prevailing economic turmoil, but the hike is another blow to consumers.

“We have previously complained about interest rates that they were already high evidenced by consumers’ failure to repay the loans as reported by the central bank.

“This now means even tough times for consumers who will definitely have a hard time to service the loans.” he said.

Indigenous Businesses Association of Malawi president Mike Mlombwa said the rise in base lending rates is a recipe for disaster for small businesses.

“This certainly means a little if not narrow breathing space for us small businesses who are yet to recover from the Covid-19 pandemic and are struggling to repay loans which they incurred at the peak of the pandemic to boost our businesses,” he said.

Last month, the Reserve Bank of Malawi (RBM) revised the policy rate from 12 percent to 14 percent, a move which pushed banks’ lending rates from an average of 11 percent to 13.56 percent.

RBM Governor Wilson Banda justified the raise in policy rate, saying the central bank noted that inflation pressures continue to mount following persistence of the pandemic-induced supply-demand imbalances, supply-chain disruptions and rising global energy and food prices, which have been compounded by the Russia-Ukraine war.