Chilima tells banks to cut interest rates

Vice President Saulos Chilima has demanded banks in Malawi to reduce interests, saying Reserve Bank of Malawi will issue a directive on the issue if commercial banks do not reduce the rates voluntarily.

Chilima made the remarks in his speech at the Economics Association of Malawi (ECAMA) conference this morning in Mangochi.

Chilima said the interest rates must come down and that this must be non-negotiable for the banks.

“Deposit rates that banks are giving customers are too little as compared to lending rates at 23% or above.

“Thus, the Reserve Bank must engage banks on this issue as a matter of urgency. If moral suasion will not work, the Governor must issue a directive. Otherwise, our efforts to develop Malawi will be derailed. SMEs and businesses are not thriving,” he wrote on Facebook after attending the conference.

He added that in his speech at the conference, he also proposed to the Reserve Bank to consider capping the interest spread, stressing that if banks raise the lending rates, they must also pass through the same to depositors.

Chilima recalled at the conference that in the 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. Yet this is not the case. Hence my call for a directive if negotiation will not replace confrontation with the banks. We have people to serve and a country to run,” the vice president said.

Meanwhile, Parliament has this afternoon passed a motion allowing the tabling of a bill which seeks to amend the Financial Services Act to include interest rates capping.

Member of Parliament for Dowa West Abel Kayembe moved the motion in Parliament.

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