Parliament has resurrected a motion to introduce a law to regulate interests rates financial institutions charge borrowers, barely two years after the same was shot down.
This time around, Mangochi South West member of Parliament (MP) Shadric Namalomba, who is also chairperson of the Public Accounts Committee (PAC) of Parliament, is the proposed mover of the motion.
In an interview yesterday, he said he expects MPs to support his motion which he claimed is necessary to protect the interest of many Malawians who fail to access loans due to prohibitive interest rates.
Namalomba said he has delivered a notice to the leadership of the House to schedule his presentation.
Reads the motion in part: “That having observed the exorbitant interests on loans obtained from banks and other lending institutions have resulted in failure by many citizens of the Republic of Malawi to service the loans and in some cases forfeiture of property, this House resolves that a private member’s Bill that prohibits all commercial banks and financial lending institutions from recovering 100 percent of the principal of the loaned amount be drafted and introduced in the House for consideration.”
When the Bill proposing interest capping was shot down in 2018, the issue proved divisive with allegations that some MPs were sponsored to frustrate its passing.
But Namalomba expressed optimism that this time MPs will support both the motion and the Bill having understood the need for such a law.
Ironically, the initial motion on the matter was also presented by former PAC chairperson Alekeni Menyani.
In November 2018, former Dowa West MP Alexander Kusamba Dzonzi (Malawi Congress Party) introduced the Bill which proposed a regulatory measure to prevent banks and financial institutions from charging more than a certain level of interest. The House referred the Bill to a committee for further scrutiny.
Members of the three committees of Parliament comprising Public Accounts, Women’s Caucus and Government Assurances formed a Joint Committee mandated, after the first reading of the Bill, to undertake evidence-based research and study on the implications.
Proponents of the Bill, at the time, argued that the current lending rate system favoured lenders while opponents counterargued that capping the interest rate would affect the national economy as banks are likely to collapse.
In a written response yesterday, Kusamba Dzonzi said the resurfacing of the matter shows that truth is unstoppable and urged parliamentarians to stand firmly against any form of bribe to frustrate the motion and Bill.
Commenting on the proposal, economist Milward Tobias, who is also executive director for Centre for Research and Consultancy, said the matter is sensitive and should be handled soberly.
He said real interest rates in Malawi are higher than in countries such as Zambia, Kenya and Mozambique; hence, there is need to study economic dynamics in these countries to understand why this is the case.
In earlier interviews, Bankers Association of Malawi warned of far-reaching consequences to the economy once interest rates are capped through the Financial Services Act (Amendment) Bill.