Vice-President Saulos Chilima has said despite a number of positive innovations in the financial infrastructure, the financial sector is yet to meet the growing needs for more diverse sources of finance.
Speaking at the opening of the Financial Market Dealers Association (Fimda) 2016 Annual Lakeshore Conference in Mangochi on Saturday, the Vice-President observed that through greater innovation, the financial sector can have a larger impact on the economy.
He said: “First, it [the financial sector] should address the challenge of missing markets. Here, I have in mind the lack of long-term financing that is required to support long-term investments that expand the productive capacity of the economy.
“These include infrastructure, factories, equipment, new housing, commercial buildings, education, research and development. These types of investments are considered key drivers of economic growth since they enable private enterprises to produce more goods and services. They require
financing which is available for an extended period of time.”
The Fimda 2016 conference, held under the theme Malawi Financial Markets Innovation: A Catalyst for Financial Deepening and Economic Growth, attracted presentations from financial market wonks as well as officials from the Reserve Bank of Malawi (RBM).
Chilima bemoaned that the financial system is currently not structured to provide adequate and suitable finance for development, stressing that the financial system should fulfil the core function of channeling national savings into an adequate supply of financing with longer maturities to meet the long-term investment needs of the economy.
He said: “A broad range of financial instruments, therefore, should be available to support long-term investment. Another missing segment of the financial sector that requires creative thinking and action is the mortgage market. Access to affordable housing finance remains a huge challenge for Malawians.”
What is worrying Chilima is the high cost of mortgage finance in Malawi, which has resulted in few people, mostly through employee housing schemes, accessing housing finance from commercial banks.
His worry is pertinent because available figures show demand for housing continues to grow at a time the financial system lacks appropriate instruments to finance this crucial need.
“Affordable housing is a basic good that should be available at affordable costs to citizens. Addressing this challenge calls for creativity from financial market players to come up with suitable term structure of interest rates and tenors for mortgage bonds,” he said in a presentation that linked financial markets innovation and economic growth in Malawi.
Outgoing Fimda president Alfred Nhlema called for financial market dealers to be ethical and be of high integrity.
To hammer the point home that ethical behaviour and integrity are critical to the profession, the conference included a presentation on the same from University of Malawi.
Nhlema urged dealers to be highly informed because the profession is largely technical.
Some of the presenters at the conference included John Kamanga, chief executive officer (CEO) of Malawi Stock Exchange (MSE) who spoke on the future of the MSE, the challenges and opportunities and Misheck Esau, CEO of CDH Investment Bank, whose presentation was on debt capital funding, an alternative to bank or money market funding. n