Principal Examiner Consumer Protection Reserve Bank of Malawi (RBM) Catherine Nkhwazi has said most Malawians end up in a credit trap because of financial illiteracy.
Nkhwazi made the remarks on the sidelines of a credit and loan management sensitisation meeting which RBM was conducting across the country.
RBM has been carrying out the financial literacy engagements with staff from a number of institutions in the country with the aim of equipping the consumers with tips on credit management.
She said experience has shown that many financial consumers in the country lack the required knowledge in loan and credit management which leads them into unplanned borrowing and spending which eventually lands them in the credit trap.
“Most people do not really understand that when they get a credit or apply for a loan it is not a gift. So many times people tend to relax. They do not really plan about how they are going to repay and they do not really mind how they will repaying from the institution they borrowed from,” she said.
Nkhwanzi said as a result majority of the consumers suffer from huge stress because of the credit or loan after-effects which in the end has an effect on their productivity at the work place.
She said: “When somebody is stressed with loans or credits it reflects even on their performance and output at work and eventually their employers suffer because the employees are not in a good state of mind.”
She added that as RBM they have always urged institutions which provide loans to disclose all necessary information regarding the insurance, credit or savings products that they offer to consumers to allow them to make informed decisions before a consumer commit himself or herself to such services.
“For the institutions we require them to issue key fact statements which summarises all the key details on terms and conditions so that the customer is able to follow and make informed decisions.
“We also emphasize on the terms and conditions or the language used in these guidelines to be simple and which is preferred by the financial consumer. Sometimes the institutions present the information in a language which consumers are not familiar with,” she said.
One of the institutions that RBM visited is Larfarge Limited and its operations planner Stein Nkata said they were grateful to the central bank for the financial lessons which are very crucial in every employee’s life.
Nkata said: “First as an institution we are thankful to RBM for these lessons. Most people were not aware that we also have obligations when it comes to handling credits and loans that as consumers we incur.”
Other organisations which RBM has engaged are from Malawi Police Service (MPS), Malawi Housing Corporation (MHC) and Sunbird Mount Soche.