Consumers, banks tussle over debt relief

Consumers Association of Malawi (Cama) has faulted banks for sidelining individual consumers and financially-distressed small businesses in the three-month debt relief programme.

Cama executive director John Kapito said in an interview yesterday that their assessment has established that big institutions and wealthy individuals are the ones benefitting from the programme at the expense of some individuals and small businesses.

He said: “Banks treat everyone as a suspect and they are so mean. They are so greedy.

“They only want to deal with giants who already have money, they even reach out to them but small business have no chance as they have to beg for services.”

In the face of the novel coronavirus (Covid-19) pandemic, the Reserve Bank of Malawi (RBM) signed an agreement with banks to offer three months moratorium to consumers on case by case basis to mitigate the impact of Covid-19 on loan repayment.

However, a week ago, some small and medium enterprises (SMEs) also complained of being denied the moratorium opportunity by banks, a situation they said is worsening their financial woes as they are still compelled to pay their loans amid a poor business environment.

But Institute of Bankers in Malawi chief executive officer Lyness Nkungula said banks have the plight of every customer at heart and that they are willing to support government in cushioning citizens in every way possible.

She said: “The moratorium or deferment is being provided specifically to enable the borrowers to tide over the economic fallout from Covid-19 pandemic.

“It is impeccably impossible for all bank customers to have moratorium. Some SMEs are better off than others; hence, the case by case basis. Individual customers should seek loan restructuring and it will not be treated as default.”

Nkungula encouraged individual customers that are under distress due to Covid-19 to visit their branches to negotiate for loan restructuring.

As a cushion measure, RBM also slashed the Liquidity Reserve Requirement (LRR) which instantly made available K12 billion into the banking system.

The LRR, which is a percentage of total deposits that commercial banks are mandated to keep with the central bank, was revised downwards by 125 basis points to 3.75 percent.