Bankers Association of Malawi (BAM) has said there will be far-reaching consequences to the economy once interest rates are capped through the Financial Services Bill (Amendment)
The Bill proposes to cap the interest rate applicable on the credit facility to a certain percentage above the prevailing policy rate for lenders and below the same policy for depositors.
The BAM delegation comprised the association’s Paul Guta (Nedbank managing director), Zandile Shaba (New Finance Bank chief executive officer), Macfussy Kawawa (National Bank plc chief executive officer), William le Roux (Standard Bank Limited chief executive officer) and BAM chief executive officer Violette Santhe.
BAM officials raised the concern when on Thursday they appeared before a joint parliamentary committee to make their submissions on the Bill as part of consultations for its amendment.
The joint parliamentary committee comprises Public Accounts Committee, Government Assurance and Women Caucus.
The joint committee chairperson Alekeni Menyani advised the banks to provide amendments to the Bill which was referred to the committee for perfection of the gray areas through consulting different stakeholders on financial matters.
Menyani said since the Bill was already presented in Parliament and referred to the joint committee to iron out some issues, there was no need to debate whether the Bill was necessary for the management of interest rates in the country.
In their submission, Guta fired warning shots that the economy will crash with the interest rates capping proposal, saying the country will face economic shocks due to other factors that will trigger high inflation rates.
He said banks will not cope as it will be expensive to take deposits and issue out loans that will be cheap.
Said Guta: “For every economy to survive it relies on the strong and resilient banking sector. The tenets of the Bill make its execution very difficult; should it pass in its current form into law. Therefore, one would want to say that before we reach a stage where we want to pass the Bill, it’s probably time to have another thought because as it stands, the position of the banking sector is truly challenged.”
He advised the committee to be cautious with the pace at which the Bill is being advanced, saying there is need to conduct wider consultations.
Menyani said the committee agrees with the banks representives to have further engagements on the Bill.
Initially, the committee was supposed to start working on the report of recommendations on Fri