MANGOCHI-(MaraviPost) – Malawi’s Vice President Saulos Chilima, on Friday challenge commercial banks to critically reflect on their services to customers to enhance the country’s economic growth.
Vice President Chilima dared the banks to extend their loan portfolio by making their conditions attractive and affordable to ordinary Malawians.
Chilima was speaking at this year’s second Bankers Association of Malawi (BAM) annual conference in the
The Vice President said that the role played by banks in the economic development of the country is diluted because commercial banks are failing to increase the number of people that access their services.
Chilima observed that some banking services, notably loans, are exorbitant and that few businesses can survive while faithfully repaying the loan.
He further said the banks have become so rigid that they fail to improve their service delivery to depositors and borrowers.
The VP added that this has made the banking sector unattractive to over 65 percent of the banking population.
Chilima therefore urged banks to extend their scope of interest to tourism, mining, and agriculture sectors.
“The Government expects banks to do their part to further contribute to the growth of the economy by providing financial resources at reasonable costs. Banks should respond accordingly to policy gestures from the monetary authorities as helping the business sector, which is the engine of economic growth,” says Chilima.
Sharing the same sentiments, Reserve Bank of Malawi (RBM) Governor, Dalitso Kabambe, said failure by the banking sector to make its services attractive to ordinary Malawians, is costing the sector billions of money in the form of investments.
Kabambe observed that currently, about 65 percent of money [equivalent to about K300 billion], is not banked as people do not see the benefit of taking their money to the banks.
The RBM Governor therefore advised banks to be flexible when giving loans to people by, among other things, giving them enough grace period before they start servicing the loans so that they can become stable and sustain their businesses.
BAM President, Paul Guta also raised concerns over the current 19 percent of loans that banks give are non-performing. He said most banks face challenges to get loan re-payments due to some regulations that need to be changed.
The banking sector’s exorbitant services come despite the country registering lower inflation rates, which has gone down by 1.1 percentage points from 11.3 percent in June to 10.3 percent in July.
This year’s July inflation is 12.2 percentage points better than the 23.5 percent recorded in July 2016.
The July 2017 inflation is 0.3 percentage points shy of the single digit inflation the Reserve Bank of Malawi (RBM) wants to achieve by December 2017.
Malawi’s inflation has been on a downward spiral in the first half of 2017, driven by improved food availability enabled by the tight monetary policy implemented by RBM and a stable exchange rate.