Debate on the pended Interest Rate Capping Bill resurfaced following new calls for Malawi Confederation of Chambers of Commerce and Industry (MCCCI) to support the proposed law as it will benefit its members.
The call comes on the backdrop of the high cost of finance topping the list of doing business obstacles in the country, according to Malawi Business Climate Survey (MBCS) Report produced by MCCCI.
In an interview, Malawi Congress Party (MCP) member of Parliament for Dowa West Constituency, Alexander Kusamba Dzonzi, who also tabled the Private Member’s Bill in Parliament in December, said although MCCCI’s members are heavily hit by high interest rates, their voice in defending the Bill is weak.
“During the consultations on the Bill in Blantyre, they gave me Comesa Hall free of charge, but, unfortunately, none of their top management team showed up at the meeting even though they were invited. This was repeated in Lilongwe. Why didn’t they show up?
“If they keep quiet, people will now ask questions because they represent the key component of the economy. I expect them to now help me in this fight,” he said.
But MCCCI chief executive officer Chancellor Kaferapanjira said as chief executive officer of MCCCI, he is not for the law.
He said he is not arguing against the fact that cost of finance is a constraint, but that it is not buying the mechanism followed to address the challenge.
“We think that interest rates should indeed go down, but putting it in a law means that we are putting up a permanent structure and the law will be very difficult to change.
“We agree with Dzonzi on high rate of borrowing; but the challenge is on how RBM is going to intervene in making sure that the commercial banks are not just adding unnecessary risk premiums,” Kaferapanjira argued.
Kaferapanjira further said RBM has to move quickly in addressing the matter at hand, before the Bill is taken back to Parliament.
Dzonzi argues that leaving commercial banks to decide interest rates has resulted in predatory interest rates charged on Malawians.
Earlier, Bankers Association of Malawi (Bam) president, Paul Guta, said while commercial banks agree that interest rates are high in the country, there is a need to do the right things rather than capping.
Reserve Bank of Malawi (RBM) Governor Dalitso Kabambe is on record as having said the monetary authority has had a lot of intervention on interest rates, but whether the current policy is the right framework in place or there is need to revisit the policy is up to players in the industry to discuss.
Interest rate capping is a regulatory measure that prevents banks or other financial institutions from charging more than a certain level of interest.
Currently, commercial banks have pegged their base interest rates between 23 percent and 27 percent.