Social, personal services push up private sector credit

The pickup in credit to community, social and personal services by K5.4 billion pushed up private sector credit by 10 percent in October, figures from the Reserve Bank of Malawi (RBM) show.

A published RBM Economic Review Report for October shows that on a monthly basis, private sector credit grew by K5.3 billion to K531.9 billion.

The report indicattes that the distribution of the outstanding stock of private sector credit across the economic sectors remains unchanged where wholesale and retail trade sector continued to be the largest debtor.

Reads the report in part: “Wholesale and retail trade sector made up 24.5 percent of the outstanding stock of private sector credit followed by the agriculture sector at 21.9 percent, manufacturing at 14.2 percent and community, social and personal services sector at 12 percent.”

The report shows a continued rise in wholesale and retail trade by K3 billion, electricity, gas, water and energy sector by K2.1 billion and construction by K1.8 billion.

University of Malawi’s Chancellor College economics professor Ben Kaluwa, in an interview last week, said credit composition largely reflects borrowing for consumption.

“Unfortunately, these areas do not reflect growth of the economy. This simply means households are borrowing precisely to address personal financial problems.

“What we want to see or what could be an ideal situation is  the manufacturing sector making it in the large debtor category because this is the sector that could drive the economy,” he said. 

RBM Governor Dalitso Kabambe earlier admitted that there is need to rebalance composition of credit.

He said: “Going forward, it will be important to see more credit going to the agriculture, manufacturing, mining, energy, and tourism sectors, which are key sources of growth and jobs in this country.”