High lending rates could derail recovery plan’

Money market analyst James Chikavu Nyirenda has bemoaned high lending rates warning they could defeat government’s recovery plans.

He noted it is likely that companies and individuals will find it difficult to borrow for their respective business ventures.

“If the economy is to rebound, the authorities must find a solution on the high lending rates prevailing in the banks. If banks borrow from Reserve Bank at 21 percent and institutions borrow from banks at 32 percent, the gap is just too wide,” said Nyirenda.

He called on authorities and other players in the financial sector to ensure that lending rates are affordable.

Nyirenda, however, said authorities are afraid of reducing lending rates fearing that people may be borrowing for consumption which may be inflationary.

Farmers Union of Malawi (Fum) president Felix Jumbe, in an interview, said government must consider reducing the lending rates if the recovery plan is to help the economy rebound next year.

“There are many farmers in the country who have large pieces of land but they do not have working capital. If government can have a deliberate policy of helping farmers get loans at reasonable rates then the recovery plan can work,” said Jumbe.

He added that the recovery plan might be difficult to implement if companies and individuals cannot borrow because of high lending rates.