High interest rates frustrating SMEs
Small and Medium Enterprises Association (Smea) says high lending rates have further worsened access to loans among the country’s small and medium enterprises (SMEs).
In October last year, Reserve Bank of Malawi (RBM) raised the benchmark rate to curb borrowing so that the kwacha and inflation could stabilise. The policy rate was hiked from 25 percent to 27 percent, a development that triggered commercial banks interest rates to go up.
Currently commercial rates are hovering around 42 percent for risky borrowers.
In an interview with Business News on Tuesday, Smea president James Chiutsi said the current arrangement leaves no room for growth for the SMEs.
“Access to funds for SMEs is already very limited in Malawi, so raising interest rates only worsened the situation.
It is like SMEs are producing only to help them pay back high interest rates, this obviously leaves no funds for growth. The end result is stunted or indeed negative growth of the SME sector,” he said.
National Bank of Malawi (NBM) general manager Mac Fussy Kawawa complained in an earlier interview with Business News that “we would like to see more borrowing from our customers to improve our returns. However, at the current rates, the level of borrowing is low”.
