K32.9bn loans placed under Covid-19 relief

The Reserve Bank of Malawi (RBM) says businesses and individuals have benefitted from commercial banks’ relief on payment of interest and principal on loans amounting to K32.9 billion as of March this year.

The moratorium on interest rates was effected by banks in April 2020 in response to RBM’s call to cushion customers who were in financial distress induced by the Covid-19 pandemic.

Under the arrangement, borrowers whose businesses and cash flows were affected negatively by Covid-19 pandemic, were granted relief not to be repaying their loans.

RBM spokesperson Onelie Nkuna said in a written response last week that moratoriums have provided relief to borrowers, adding that the arrangement has yielded expected results given the amounts.

She said: “Through the arrangement, borrowers have been able to use the spared funds to finance their business operations during this crisis period.

“A number of borrowers who were granted such relief are, therefore, still in business. Such borrowers have even maintained their level of employees who would otherwise have been laid off.”

Nkuna said going forward, the central bank will continue to engage banks to continue granting moratoriums to deserving borrowers as long as the Covid-19 pandemic continues to negatively affect businesses and their cash flows.  

On her part, Bankers Association of Malawi (BAM) chief executive officer Lyness Nkungula said banks will continue to cushion those in financial distress, saying the moratorium has helped businesses and individuals to remain afloat.

She said: “Banks have the welfare of their customers at heart. The moratorium has given a relief to customers as evidenced by bank customers who have overwhelmingly applied for the facility and been granted access.

“Going forward, banks will still be offering the relief window based on case by case basis,” she said.

Meanwhile, Chamber for Small Scale Business Association executive secretary James Chiutsi said the move by the central bank and commercial banks, had a noticeable impact on small and medium enterprises (SMEs).

“The extension of the same from the banks is thus welcome as this measure has had a positive impact on SMEs,” he said in a written response.

On his part, Indigenous Businesses Association of Malawi (Ibam) president Mike Mlombwa said businesses have had breathing space courtesy of the moratorium on interest rates.

He said with the rising cases of Covid-19,  which is a major concern for local businesses, the moratorium has and continues to ease the burden on businesses.

In mid-April, RBM responded to the Covid-19 pandemic by, among others, announcing measures to mitigate its impact, including moratorium on bank loan interest and transaction fees levied by mobile money operators.

RBM also slashed the Liquidity Reserve Requirement which instantly made available K12 billion into the banking system.