Borrowers struggle to service bank loans
Despite improved economic environment characterised by declining inflation and interest rates, borrowers in 2017 struggled to service their loans, according to financial statements of some commercial banks for the year ended December 31 2017.
In its published financial results for the period under review, listed National Bank of Malawi (NBM) plc indicated that the maize export ban accelerated the crash in maize prices; hence, affecting the ability of commodity traders to service debts with the bank which resulted in reduced demand for certain bank products and worsened non-performing loans (NPL) portfolio.
This necessiated the bank to make a significant provision of K5.96 billion.
New Finance Bank (NFB) made a loss after-tax of K1.84 billion from K1.9 billion the year before, which is attributed to high costs of deposits and slower than anticipated growth of the loan book in the first half of the year.
But in a statement, the bank said in the second half of the year, it started to break even on a month-on-month basis.
Malawi Stock Exchange (MSE)-listed Standard Bank plc posted a profit after-tax of K12.1 billion, down from the previous year’s K19.4 billion attributed to credit losses perpetuated by growth of NPLs, especially in the agricultural sector.
Commenting on banks’ performance, University of Malawi’s (Unima) Chancellor College economics professor Ben Kaluwa yesterday said this shows that borrowers were strained over time with high interest and inflation rates.
“Non-performing loans is a build up [and] people don’t just drop into non-performance. It piles over time. With high interest rates, borrowers were strained.
“So, this is to do with domestic issues such as inflation and interest rates, which have been high in the region, making it difficult to borrow and repay the loan,” he said.
Malawi Confederation of Chambers of Commerce and Industry (MCCCI) chief executive officer Chancellor Kaferapanjira said the development shows how much the private sector has been strained.
“It doesn’t matter whether one aspect of the economic indicators is doing well, you need a package of factors.
“Power is almost non-existence for production despite reduced interest rates and declining inflation,” he said.
World Bank statistics show that the country’s level of NPLs has risen to 19 percent as of July 2017, which is above the regulatory benchmark of five percent.
