Three parliamentary committees undertaking consultations on the Financial Services Act (Amendment) Bill have faulted the Reserve Bank of Malawi, accusing it of failing Malawians by not using its mandate to protect citizens from high rates.
Legislator Alekeni Menyani, who is chairing a joint parliamentary committee comprising Public Accounts Committee (PAC), Government Assurances and Women’s Caucus, expressed the sentiments after RBM Governor Dalisto Kabambe appeared before the committees consulting on what is also known as Interest Capping Bill.
He said: “Malawians feel that you have failed them. You have failed to foster your fiduciary functions to Malawians. Malawians fear to borrow from banks. Whenever they are told about a bank loan, they fear and tremble as if they have seen a snake because of exorbitant interest rates.
“Malawians have suffered the consequences of your failure to properly regulate the financial sector to ensure they enjoy low interest rates.”
Committee members also took turns to blame the governor for purportedly focusing on other functions of the central bank at the expense of fostering strong regulation to bring down interest rates through the registrar of financial institutions.
Reacting to the accusations, a composed Kabambe said it was unfair to accuse RBM of failing Malawians. He said achievements registered in the economy over the past four years, including economic stability coupled with lowering of interest and inflation rates demonstrate that the Central Bank has the welfare of Malawians at heart.
He said: “On interest rates in the country, at present you will find that we have the lowest interest rates since 2005. Equally, interest rates are a factor of many factors. They are a factor of how much the economy is producing. They are a factor of how much you are exporting outside the country.”
Kabambe said the base lending rate has since 2012 been reduced from 27 percent to the current 14.5 percent and interest rates for commercial banks base lending rate from 47 percent to now 14.9 percent.
He said the proposed Interest Rate Capping was not the best way to go since the central bank is working on bringing down lending rates. He added that high interest rates have prevailed over the years due to the fragile economy.
Kabambe said if the economy continues to be stable, interest rates will continue falling down.
Earlier, Secretary to the Treasury Cliff Chiunda spoke on the need for the committee to interrogate and discuss more on the Bill by looking at pros and cons before deciding on the particular capping proposal.
He said Treasury believes the legislation route on interest rates will have negative impact on the economy.
But Menyani said the committee is advancing aspirations of Malawians, saying Parliament represents views of the people, adding that various stakeholders that are being consulted now are representing interests of the common man.
Expectedly, during their appearance, also yesterday, Human Rights Defenders Coalition representatives led by chairperson Timothy Mtambo and his deputy Gift Trapence rallied behind the Bill.
Mtambo described the Interest Capping proposal as a human rights issue, saying some Malawians have been left destitute after their properties were seized by commercial banks for failing to pay loans due to the exorbitant interest rates.
Menyani said the committee, after consultations, will write a report containing amendments to the bill that will be submitted to the mover of the Private Member’s Bill Alexander Kusamba Dzonzi to include the new amendment.