The Bankers Association of Malawi (BAM) has bribed Malawi Members of Parliament (MPs) with about K1 million each in a bid to stop the passing of the Interest Rate Capping Bill.
According to whistle-blower Gerald Chavez Kampanikiza, BAM has organized a breakfast meeting in Salima today to lobby the legislators to shoot down the proposed legislation.
“GCK Cameras can this evening confidently confirm that BAM tomorrow’s breakfast is on in Salima where MPs are going to receive fuel reimbursement of about K800,000 as a way of buying them to shoot the financial bill,” Kampanikiza posted on Facebook.
The private members bill is expected to be tabled in Parliament on Thursday by Dowa West legislator Alexander Kusamba Dzonzi.
The proposed legislation seeks to regulate interest rates by among others setting up a ceiling of interest rates charged by banks to a maximum of 5 percent above the base lending rate set by the Reserve Bank.
It will also set up a ceiling of total interest charged to customers by banks to not exceed capital borrowed. The proposed law will prohibit any bank and lending institutions from recovering more than 100 percent of the loaned amount.
BAM wants the bill shot down arguing that it will kill banks and crash the entire economy.
However, a financial and governance expert noted that banks in Malawi are at the moment banks squeezing growth of industries by charging exorbitant interest rates and once companies fail to pay back loans the companies scale down operations and eventually close down resulting in untold suffering of employees.
“Imagine interest charged can accumulate to high as 1,000% of capital borrowed making repayment impossible even if one wants to continue operating with the aim of repaying the loan. Remember they use compound interest system i.e. interest on interest.
“If you default for whatever unforeseen reason in most cases being high loan repayment levels, the interest can accumulate to over 10 times the capital borrowed. This results in people losing property to banks and throwing borrowers into financial crisis and misery,” the expert.
He added that people in the villages cannot borrow to improve their agriculture productivity because they fail to pay back the costly loans hence interest capping for microfinance institutions will mean more borrowing for small scale businesses and agricultural growth.
The expert also dismissed concerns that the bill will lead to closing down of banks saying strong and ethical banks will survive.
He said: “Banks and the Central Bank have helped kill entrepreneurship in Malawi through exorbitant and punitive interest rates. So many SMES cannot start or have closed down due to interest rates that look fine when you borrow but quickly turn into katapila. Let sanity return to the banking sector.”
