A Credit Reference Bureau (CRB) report shows that the bureau has in the last six months prevented banks from giving out loans amounting to K657 million to high risk borrowers.
In an interview CRB managing director Patricia Mwase said the banking sector is the beneficiary of their work.
“We have not been able to classify which sectors were mostly affected, but the information we have gathered indicates that most of those who have been affected were businesses
“As a result, they were denied loans because they were considered high risk borrowers [as] they either had unsettled loans in other banks,” she said.
This should be good news to commercial banks because credit risk has remained a threat to the resilience of the banking system.
Most of these borrowers are local businesses.
In its financial stability report published in December, Reserve Bank of Malawi (RBM) indicated that between March and October 2016, credit risk stood at 14.7 percent of the gross loans and leases which was way above the regulatory benchmark of five percent.
According to RBM, in absolute terms, non-performing loans (NPLs) increased to K507.6 million in September 2016 from K403.3 million in March 2016 while NPLs for non-deposit taking microfinance declined to K1 billion in September 2016 from K1.1 billion in March 2016.
Bankers association members are the highest beneficiaries,” she said.
According to the report, K73 million which was almost written off has been recovered as borrowers were asked to make good outstanding obligations before accessing additional credit with the Bankers Association of Malawi (BAM)and Higher Education Students Loans and Grants being the main beneficiaries.
On the other hand, an equivalent of K97 million has been negotiated and restructured with the lenders while obligations worth K5 million have been cleaned up by checking the records during the period under review.
However, Mwase said the bureau is yet to engage micro finance institutions (MFIs). Data available is only for three MFIs out of 30.
BAM executive director Lyness Nkungula was not immediately available for comment, but in an earlier interview she said the economic situation has caused high defaults despite, some people finding themselves in such a situation because of financial mismanagement.
“Quite a number of customers are sincere in their borrowing, but the economic situations are failing them. You will find that prices of goods have sky-rocketed while salaries have remained static,” she said.
Executive director of Higher Education Students Loans and Grants, Chris Chisoni, said the collaboration between the two entities has helped his organisation to recover money from the students’ loans scheme fund.