Bankers Association of Malawi (BAM) says borrowers are overwhelming commercial banks with request for a three-month debt relief although most of the applications do not qualify.
BAM chief executive officer Lyness Nkungula observed in a written response on Wednesday that borrowers are rushing to the banks to get loan moratorium which is impeccably impossible for all bank customers to access.
She said: “People with older loans may not really need the moratorium as much as those with younger loans. I would encourage customers to seek debt relief only if there is a dire need.
“Otherwise, if you have sufficient resources and can pay the equated monthly installments [EMIs], don’t opt for the moratorium. If you can afford to repay your loan EMIs, you should try to set aside that amount unless doing so will adversely impact other pressing financial requirements.”
While urging borrowers to seek clarification on how the moratarium will affect their loan before reaching a conclusion, Nkungula said the moratorium will not be granted to groups but on case by case basis.
Chamber of Small and Medium Enterprises executive secretary James Chiutsi said small and medium enterprises (SMEs) are hoping for an extension of three-month debt relief, observing that business has slowed.
“We have always been worried that most of the banks do disburse loans to SMEs and demand repayment over a short period of time. So, for SMEs to plan, it has always been a problem,” he said.
On his part, National Small and Medium Enterprises national coordinator William Mwale expressed concern that a lot of SMEs are being turned away by the banks because they do not qualify for the moratorium.
But Minister of Finance Economic, Planning and Development Joseph Mwanamvekha said if SMEs fail to qualify for the moratorium, some of them, especially those in cities, will be supported with social cash transfer programme to mitigate the impact of the novel coronavirus (Covid-19) pandemic.
Last month, Reserve Bank of Malawi (RBM) signed an agreement with commercial banks for a three-month debt relief due to financial distress induced by Covid-19 pandemic.
Recently, the central bank’s Monetary Policy Committee also slashed the Liquidity Reserve Requirement (LRR)— the amount of cash that banks must hold in reserve against deposits made by their customers—by 125 basis points to 3.75 percent making available K12 billion into the banking system.
RBM Governor Dalitso Kabambe, who also chairs the MPC, said the measures should compel commercial banks to reduce lending rates and bolster cash flow of both businesses and households.