Private sector credit rises to k7.8bn—RBM

Reserve Bank of Malawi (RBM) says commercial banks’ credit to the private sector grew by 1.2 percent to K7.8 billion between January and February this year.

Unfavourable economic uncertainties brought about by the Covid-19 pandemic stifled growth in real private sector credit which slowed at the peak of the pandemic, but the RBM data show that private sector credit continued to grow in February, registering an annual growth of 17.6 percent from 15.6 percent in January 2021.

The RBM February Economic Review Report shows that on a month-on-month basis, private sector credit increased by 1.2 percent to K7.8 billion in the review month following another expansion of 0.3 percent to K1.6 billion in the previous month.

In an interview on Friday, Indigenous Businesses Association of Malawi president Mike Mlombwa said the easing of travel restrictions and other Covid-19-related restrictions could be one of the reasons behind the pickup in credit to the private sector.

He, however, said the development could also be due to the fact that most businesses are still struggling due to Covid-19; hence, increased borrowing to finance their daily obligations.

Said Mlombwa: “The easing of the measures instituted to curb the Covid-19 pandemic has opened up the door for businesses to trade which could be linked to the pickup of credit .

“But mostly, this development could also be due to the fact that firms have no choice, but to borrow for their financial needs.”

On his part, Chamber for Small and Medium Businesses Association executive secretary James Chiutsi attributed the pickup in credit to flexible policies jointly instituted by RBM and banks to cushion financially distressed individuals and businesses.

He said: “You may recall that there are measures, including the moratorium on interest rates which banks effected since last year to cushion struggling businesses and individuals.

“This is helping small and medium enterprises  in dire financial stress to restructure their loan facilities in a flexible manner and create room for businesses to borrow.

Chiutsi said on the other hand, the flexible monetary policy measures are also helping borrowers to lend money at fair rates.

In terms of economic sectors, increases in private sector credit were observed in financial services at K3 billion, restaurants and hotels at K2.9 billion, electricity, gas, water and energy sectors at K2.3 billion and community, social and personal services at K1.9 billion. 

Conversely, net repayments of K1.6 billion, K1.2 billion, K1.2 billion and K904.7 million were recorded in agriculture, forestry, fishing and hunting, construction, manufacturing and wholesale and retail trade, respectively.

According to the data, , the co mmunity, social and personal services sector held the largest share of outstanding private sector credit at 29.8 percent, followed by the wholesale and retail trade at 24.2 percent, agriculture, forestry, fishing and hunting at 18.7 percent and manufacturing at 12.2 percent.