National Bank of Malawi (NBM), which bought 97.05 percent stake in Indebank Limited last year, plans to transform the bank from retail to development banking, a process which officials say is almost 80 percent complete.
Plans are underway for the two banks to merge and trade under one name, subject to Competition and Fair Trading Commission (CFTC) approval.
Indebank was established in 1972 and derives its name from Investment and Development Bank Limited—the original name at the time of its founding.
In 2001, Indebank transformed into a commercial bank following the issuance of a commercial banking licence by the Reserve Bank of Malawi (RBM).
Speaking on the sidelines of NBM 44th Annual General Meeting (AGM) in Blantyre on Friday, chairperson Mathews Chikaonda said the acquisition of Indebank Limited will enable the component of investment and development in the bank to be revived with many credit lines in place.
He said: “We are very excited with the acquisition [of Indebank] because there are some credit lines we were not able to use with a simple commercial banking licence. The component of development banking in Indebank had collapsed completely and we have now revived it.
“The private sector should now be rejoicing that we now have a development bank back on line with which they can do business of development nature which is a different type of lending they can do with National Bank commercial side.”
He said at the moment, NBM is negotiating with various creditors, including Citi Bank of South Africa, to build capacity of development banking in Indebank.
Chikaonda said once that is complete, the local private sector can borrow from the bank at reasonable interest rates to finance their projects.
“They [the private sector] may be able to access loans at a much reduced interest rate of nine percent depending on the facility and risks involved,” he said.
Currently, commercial bank interest rates are hovering at around 39 percent, which is a hindrance to private sector investment.
While bemoaning a low saving culture among Malawians, Chikaonda said there is still development financing in Malawi, citing the insurance sector which has pension funds money that could be utilised for development.
He said the acquisition of Indebank has resulted in both deposits and loan book at group level increasing by 48 percent and 44 percent respectively, signifying future earnings potential of the investment.
NBM chief executive officer George Partridge said the high interest rate environment is continuing to negatively affect private sector investment.
He, however, said the wholesale banking division of the bank has started arranging an agricultural storage credit line of 25 million euros (about K20 billion) with the European Investment Bank (EIB) aimed at financing medium to long-term investments for the purchase, construction, renovation and extension of warehouse and grain storage assets.