Malawi banks struggling to meet liquidity requirements

Some commercial banks in Malawi are struggling to meet their minimum liquidity regulatory requirements with an analyst blaming it on the uncertainty in the sale of Malawi Savings Bank (MSB) which has since been suspended.Malawi kwacha

MSB bank

MSB bank

In a bid to meet the regulatory requirements, the struggling commercial banks have since resorted to borrow from other financial institutions through the interbank borrowing market while others have beefed up their liquidity through the Lombard Facility—a Reserve Bank of Malawi (RBM) relief window—for cash stressed banks.

For the past two weeks the commercial banks as reported by RBM, the local central bank, have been borrowing at least K15 billion per day, a situation that has prompted the interbank lending rate to shoot from about six percent early last month to about the current 26 percent.

An analyst has however blamed the tight liquidity on the uncertainty surrounding MSB sale, a government wholly commercial bank, a financial institution with the largest network in the country.

A treasury manager who sought anonymity in an interview with Nyasa Times recently noted that the uncertainty surrounding MSB sale, which has since been suspended by President Peter Mutharika due to calls by the civil society not to sell the commercial entity, is negatively affecting the financial system.

“You might be aware that there were reports of some customers withdrawing their deposits from MSB. This has affected the liquidity position of the financial system and needs to be cleared off as soon as possible for a stable system,” said the manager.

While blaming the financial stress on the sale of MSB, the analyst also pointed out that RBM policies of reining in inflation through a tight monetary policy and the ongoing tobacco marketing season are partially contributing to the status.

Recently, the Monetary Policy Committee which the central bank chairs, maintained the Monetary Policy Rate and Lombard Rate—the rate at which commercial banks borrow from RBM—at 25 percent and 27 percent respectively to fight inflation.

Although inflation fell to 18.2 percent in March 2015, it rose to 18.8 percent in the following month, a situation which would require RBM to tighten further its policies if it has to meet its 15 percent June 2015 target.

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Black and white

I get better returns from my bank mkhonde every December so the high street banks can hang with their low interest

Walu Kalua

Inefficiencies, failure to invest in local talent, research and innovation leads to slow, agonizing death. Too big to fall? No. It’s a global economy and local banks need step up and compete based on best practices, disruptive FinTech, know your customer, anti money laundering and anti terrorism culture.


The Reserve Bank is responsible, the rates are discouraging people from saving. People would rather deposit their Monies in money making Unit trusts and shares than savings, you save money and it benefits the Bank not the depositor, interest paid out to depositors by Banks is very small and they take time to give you your earned interests. Reserve Bank as a regulator must bring in policies that will benefit both the Depositor and the Banks.


If RBM has a relief for banks then why not insurance companies? U had to close a Malawian company (citizen insurance)that had malawians earning levels at heart but since its closure we are paying premiums that are really a reap off.we miss citizen insurance and these foreign companies are milking us so much plus taking forex out. Poorest nation in the world!! Wrong decisions and priorities.


Analyst please explain how the uncertainty over the sale of MSB can bring a liquidity crunch in the market. Are people withdrawing their deposits and keeping them in their houses? What is the share of total deposits in the market for MSB? Scapegoats ayi.




The economy is in bad shape. People are unable to save. Money withdrawals are higher the deposits. Anthu akungodyela mthumba.


Ah! Okhay!


Some bank???? Did you mean village banks??

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