Economist says high interest rates cause for worry as inflation persists in Malawi

A leading economic commentator in Malawi has asked the government to intervene in the country’s bank interest rate which he says is leaving most Malawians poorer than ever before.

Malawi Kwacha

Malawi Kwacha

Kachaje: High interest rates worrying

Kachaje: High interest rates worrying

Henry Kachaje, who heads the Economists Association of Malawi, told the state controlled MBC tv that there is need to have clear policies that would protect ordinary Malawians from banks that are only bent to make huge profits at the expense of poor Malawians.

“Almost all banks are making huge profits at the end of the year. The government cannot control interest rates but we need some intervention from the government,” he said.

He said it was ironic that the base lending rate, the rate at which banks use to give people who lend money to the banks is very low.

Kachaje said it was therefore important to have policies in place that would ensure that people who lend money to the banks also make profits..

He suggested banks don’t care much about the private sector because the government itself is the biggest customer as it borrows huge sums of money.

Kachaje, however, said government cannot fix the interest rates, saying doing so would excessively limit the profits and this would have negative effects on the economy as the economy would completely colllapse if banks close down.

Meanwhile, the country’s year-on- year inflation as measured by Consumer Price Index (CPI) is hovering at 23 per cent .

Inflation in the country is mainly driven by availability of food especially maize.

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Zidura Ntengo Undigwere
Guest
Zidura Ntengo Undigwere

The spread between what we pay when we borrow from the bank and what the banks pay us when we deposit our money is unjustified. And acceptable only in a country, of docile people, like ours. And the banks know this all too well.
If I had, say, K10 million, in a term/business account, a year’s interest would not even be enough for my family to live on for two months.
That’s highway robbery. Wonder why some people keep their money overseas? Therein lies part of the answer.

Charombanthu
Guest
There are certain parameters or determinants over which banks have no or little control except the RBM. Such high interest rates are largely, but not entirely, caused by the high RBM policy lending rate, the high regulatory liquidity reserve ratio (LRR), the high supervisory fees, the Treasury Bill Rates as well as the government bond rates, all of which are factored into the calculation of individual banks’ base lending rates. The only factors over which banks could have control over are such items as operating costs, the cost of funds they have on their balance sheets, the return on shareholders… Read more »
wa ku Mitchesi kujaaaaa!!!!
Guest
wa ku Mitchesi kujaaaaa!!!!

“…parameters or determinants…”, chani chani, inu apa.
People are asking for fairness, and are tired of kuponderezedwa ngati nyerere (being thwarted every which way financially by the oligarchs, these banks). Are we the worst offenders, in the world, when it comes to paying back the loans?
Perhaps the banks should do a better job of screening the people applying for the loans, in the first place.

Bololo
Guest

(9) Kalunga Kaluja. RBM has a section under bank supervision that look into that. Write to them or go there for more information. A clue though make sure you didn’t sign for that arrangement otherwise the contractual agreement would be legally binding in absence of national laws against it.

Mapwevupwevu
Guest

Stupid Malawians you are not commenting on this insightful article! Koma akanati wina wamenyedwa kuzinziri ndiye 482 comments!

Mxiiii!

mbuyuni
Guest

Ife have resorted bank ya mmudzi where our interest rate is at 20% and we share the interets at the end of the year.I agree to someone suggesting giving this country to a Mangochi business man to run this country, may be due to business success some guys from this district are registering.

Edward
Guest

I agree with you Henry Kachaje. I feel the government can not deliberately intervene because it has interest in the huge profits that banks are making. Huge profits for banks means huge corporate tax that these banks will remit to MRA, government in this case.

drakes
Guest

Banks in Malawi are dirty I would urge Malawian not to save in Banks no apology. Would rather save with Unit Trusts,buy shares get your money @ stock xchange to grow it. Those who are seriously looking at long term savings check with Old Mutual they will advise you on which product you can save your money with.Dont waste your time saving with all banks in Malawi they are useless.

Tionane
Guest

I suggest a regulation that states you cannot charge interest more that twice your offer, so if the Banks are offering 12% to depositors, then they should not charge more than 24% to borrowers.

hastings
Guest
thanks Kachaje, the banks are good at promoting fixed deposits, Call accounts etc to their costomers, but the Money they gain out of that is too small as compared to the interest a fellow poor malawian pay back where get the loan from the same bank With smilar amount of Money. i will give an example on that one, if you borrow K2m from the bank, the interest is around 40%, but if you open a cll account or fixed account With the same amount of Money to the same bank, you get an interest of 7-12%, is this fair?… Read more »
koma kumaneko
Guest

Kachanje mungovutika kunena, which govt can take good advices? Malawians will cry, die and burried. What you will get from the govt as a reply is rude response from their spokespersons. Zisiyeni atiombole ndi mulungu. I can see fuel shortage is imminent.

wpDiscuz

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