Finca is now a commercial bank after Reserve Bank of Malawi deputy governor Grant Kabango on Friday officially gave Finca officials a banking licence, increasing the number of banks in Malawi where the economy is falling steadily.
Kabango told banks to be accountable and transparent to their clients to instil confidence.
He said banks have an obligation to sensitize their clients on bank charges and interest rates before the clients take bank loans to minimise defaults which lead to confisication of property.
Kabango’s comments come hot in the heels of newspaper publications of banks selling various property and items after clients failed to honour debts
President of Indigenous Business Association of Malawi Mike Mlombwa said there was need to have a law which puts cut off point for interests on loans.
“In other countries, this law is working very well. You cannot put it open ended that interests should be accumulating on a loan. This is why we find that someone took a loan of K2 million and the bank wants him to repay K10 million. We should have calculations on how long banks can charge interests on loans to avoid punishing people who innocently get loans,” he said.
He said it is a pity that most of the owners whose property are being auctioned by banks took loans when interest rates were around 20 percent and now they cannot afford to repay the loans because the interest rates have doubled to 40 percent due to the harsh economic climate.
Finca started as a lending institution to women to boost their small scale businesses in the 1990s.