Credit to the private sector up 13.2%
Staff Reporter
Credit to the private sector is growing with latest figures from the Reserve Bank of Malawi (RBM) showing that it expanded by 13.2 percent between November and December 2018.
Due to slightly high inflation, economic uncertainties and tighter bank lending conditions, growth in real private sector credit had been negative between mid-2012 and August 2018.
According to RBM Monthly Economic Review for December 2018, credit to the agricultural sector expanded by K3 billion, which according to the central bank reflects economic agent’s uptake of loans to finance the 2018/19 agricultural production.
On the other hand, in terms of shares in the outstanding stock of private sector credit, wholesale and retail trade sectors, at 25.3 percent, represented the largest share of the total private sector credit.
Agriculture, manufacturing and community, social and personal services sectors claimed 20.8 percent, 18.7 percent and 10.5 percent of the total outstanding credit stock, respectively.
In an interview yesterday, Malawi Confederation of Chambers of Commerce and Industry (MCCCI) director of business environment and policy advocacy Madalitso Kazembe said the trend is good for the economy, but cautioned that for the country to register real economic growth, credit should go to growth- oriented sectors and less to government.
“What remains crucial is for us to also assess the increase in credit to government because even if credit to private sector expands, but the same to government is still higher than credit to private sector then the excessive government borrowing would still crowd out the private sector borrowers,” she said.
Kazembe said it is also critical to evaluate the composition of the sectoral distribution of the credit, adding that credit needs to go to the agriculture and manufacturing sectors to grow the economy compared to retail and wholesale sectors.
On his part, Indigenous Business Association of Malawi (Ibam) president Mike Mlombwa said expectations are high that the monetary policy measures recently effected by the central bank will translate into more that credit to private sector to anchor economic growth.
RBM governor Dalitso Kabambe is on record as having said that the central bank will facilitate increased private sector credit against total domestic credit from an average of 9.6 percent to 16 percent by 2021.
