Opportunity Bank of Malawi (OBM) will lay off about 250 of the 450 employees this week after failing to make any profit in the 2016 fiscal year, Business Review has learnt.
This is the second major retrenchment at the bank following the July 2016 one that saw about 172 people out of employment as the bank made K2.8 billion loss in 2015 fiscal year.
A high ranking source at the bank told Business Review that the problems at the bank were compounded by employees’ demand for a 200 percent salary increase and other benefits in November 2016.
“It is not clear what was settled but it is reported to be significant enough to have a negative impact on the bank’s financial position and not sustainable in the long run.
“This was coupled with tough economic conditions affecting the industry. Opportunity Bank continues to make losses every year,” said the source.
However, the source said: “There will be no closure of branches but downsizing branch and head office staff.”
OBM deputy CEO Bernard Mkandawire confirmed to Business Review that the bank was going through tough economic conditions and was in the process of restructuring which might lead to downsizing of staff.
“I can confirm that the bank will go through some restructuring process this month which will include downsizing of staff, all of us will be subjected to this restructuring,” he said.
The midterm financial reports of most banks in Malawi for 2016 indicated that profits decreased.
Misheck Esau of CDH Bank told Business Review that overall banks’ financial performance over the past three years has been affected by growing levels of non-performing loans.
He said the slow-down in economic activity in general and the high interest rates have affected the capacity of many bank customers to service their loans that they borrowed prior to 2012 when interest rates were lower than they are now.
“According to RBM financial sector stability report of 2016, non- performing loans are in excess of 12 percent of gross bank loans for the entire sector. This is quite high and a big challenge to bank profitability.
“So it is not surprising to see that the financial sector as a source of employment is also tightening on recruitment or retention of existing staff,” he said.
Esau further said when non-performing loans increase: “One of the normal things for banks to do is to tighten lending and also to reduce costs generally. In turn, this does not help the economy because it is the availability of finance that generates economic activity and growth.”
He observed the high interest’s rates are one of Malawi’s biggest economic enemies that have stifled the economy since 2012.
“The consequences on economic growth and development are dire. Investment in new projects has slowed down as most companies discover that most projects are not viable with the high cost of finance.”
He said he only hope that Reserve Bank of Malawi and Ministry of Finance, responsible for lowering interest rates, will do their job better in 2017 so we can start to see real cuts in interest rates. n