Chilima Orders Commercial Banks To Reduce Interest Rates

Vice President Saulos Chilima has told commercial banks in the country that interest rates must come down “and that is non-negotiable.”

Chilima, addressing the Economics Association of Malawi (Ecama) Lakeshore Conference in Mangochi a while ago, Chilima also charged that deposit rates that banks are giving customers are too little (at around five percent) as compared to lending rates which he said have averaged 23 percent.

He recalled that in 1980s, Malawi had only two banks and then lending rates averaged 19.1 percent while deposit rates averaged 11.5 percent, thus providing a spread of 7.6 percent.

“As the financial sector opened up, one would have expected competition to force the narrowing of the spread,” said Chilima.

Meanwhile, Chilima has proposed to Reserve Bank of Malawi (RBM) to consider capping the interest spread, stressing that if banks raise the lending rates, they must also pass-through the same to depositors.

Source:NPL