Malawi Muslims Official Website
No Result
View All Result
  • Login
  • Home
  • Religion
  • Business
  • Health
  • Education
  • Entertainment
  • Politics
  • Sports
  • World
Contact Us
  • Home
  • Religion
  • Business
  • Health
  • Education
  • Entertainment
  • Politics
  • Sports
  • World
No Result
View All Result
Malawi Muslims Official Website
No Result
View All Result
  • Home
  • Religion
  • Business
  • Health
  • Education
  • Entertainment
  • Politics
  • Sports
  • World
Home Business

Are Banks a Source of Socio-economic Development in Malawi?

Marshall Dyton by Marshall Dyton
10 years ago
in Business, Featured
Reading Time: 4 mins read
A A
0
0
SHARES
0
VIEWS
Share on FacebookShare on TwitterShare on Whatsapp

It is evident that Small Medium Enterprises (SME’s) are playing a vital role in the social –economic development of Malawi. One simply has to go around the trading centres, the markets and the streets in our four cities to appreciate the expansion in economic activities being handled by SME’s.

RELATED POSTS

𝗛𝗜𝗦𝗧𝗢𝗥𝗜𝗖 𝗩𝗜𝗖𝗧𝗢𝗥𝗬: 𝗖𝗵𝗮𝗸𝘄𝗲𝗿𝗮 𝗗𝗲𝗹𝗶𝘃𝗲𝗿𝘀 𝗪𝗵𝗮𝘁 𝟲𝟬 𝗬𝗲𝗮𝗿𝘀 𝗼𝗳 𝗟𝗲𝗮𝗱𝗲𝗿𝘀 𝗡𝗲𝘃𝗲𝗿 𝗖𝗼𝘂𝗹𝗱—𝗢𝗳𝗳𝗶𝗰𝗶𝗮𝗹 𝗥𝗲𝗰𝗼𝗴𝗻𝗶𝘁𝗶𝗼𝗻 𝗼𝗳 𝗘𝗶𝗱 𝗮𝗹-𝗔𝗱𝗵𝗮

The Wrong Sacrifice: How Muslims in Malawi Are Slaughtering Community Unity Instead of Goats This Eid

The Stage He Chose: Dr. Namadingo’s Unscripted Performance in Wakata

The 2012 Malawi financial scoping survey on SME’s indicates that Malawi has about 760,000 small business owners generating an annual revenue of about US$ 2 billion{around to K500 billion}.

However, the survival of Malawi’s SME’s has been the issue of great concern and worry to the nation in the past few years as the country’s economic condition has not been friendly enough to nurture growth and expansion evidenced in the closure and downsizing of many private entities due to shortage of foreign exchange, fuel, taxation policy, banking policies among others.

Malawi has one of the lowest rates of financial inclusion in Africa. According to a recent survey conducted by the ministry of trade, only 22 percent of small businesses have or use products or services offered by commercial banks

High lending rates from commercial banks, collateral requirements, lack of business and financial management skills and the culture of aversion are some of the reasons that hinder the growth of SME’s in Malawi.

In its findings, the national statistical office {NSO} says the micro, small and medium enterprises {MSME’s} survey shows that financial exclusion of the sector is costing billions of kwacha. The report says even though the sector contribute substantial annual revenue to the country, yet about 66 percent of the sector does not have access to banking services, while 13 percent use formal but non-bank financial institutions.

Analysts’ say the banks could be using the interest rates to discourage borrowing. They say banks fear a lot of individuals and firms risk defaulting on the loans while others will have their businesses closed down or reposed.

“Actually, banks are afraid to borrow the SME’s because most of them borrow to default and not to repay, hence creating a credit risk to the banks,” says Professor Mathews Chikaonda, one of the well-known economists in the country.

The NSO reports say about 71 percent of businesses owners borrow to pay back debts and 54 percent borrow to grow their businesses. The survey established that the smaller the businesses, in terms of number of employees, the less likely that the owner has or uses banking services to manage the finances of their businesses.

“Three quarters of small business owners do not borrow because they are wary of their ability to repay the loans. The largest source of credit for small businesses is friends and family, followed by village bank of cooperatives,” reads the statement about the survey.

According to records, currently, Malawi has over 12 commercial banks trading in the country. In Malawi, it is reported that the top four banks, NBM, Standard Bank, NBS and FMB control nearly 90 Percent of the deposits, leaving the small banks to scramble for the rest.

“There is also competition for quality customers to lend and transact with. Where quality customers are scarce banks then tend to either, take thinner margins and attract the priced clients of a lesser quality. The latter leads to more defaults and provision,” adds chikaonda, himself a board chairman for national Bank of Malawi {NBM}.

However, Reserve Bank of Malawi governor Charles Chuka expressed surprise at banks’ insistence to lend money to government and corporation alone when, he says, it is clear that capital Hill is heavily riddled with debts.

“Maybe, the only way banks in Malawi can make money is through government businesses. And, I think if that is the case, it’s unfortunate state of affairs,’” says Chuka, adding, “If the banks have nothing to lend out, they end up rising their base lending rates.

Chuka says banks classified the SME’s as ‘the risky borrowers ‘with no collateral or guarantee from their companies so they had to put the bank lending rates high.

The consumers Association of Malawi {CAMA} executive director John Kapito describes the high bank lending rates as ‘prohibitive and quite depressing”.

“It will stop people from borrowing money and consumers will have no money and this will decrease consumption pattern by many Malawians,” he says

Kapito notes that high interest rates by commercial banks will likely fuel inflation rate rise as manufacturers borrowing from the banks will be forced to pass on the consumers.

The consumer rights activist also argue that the move could retard the inflow of foreign direct investment {FDI} into the country, saying investors look for destination where interest rates are low, among other factors.

ADVERTISEMENT

Financial Analysis say because banks are borrowing at a high rate from RBM, they have also raised their base lending  rates to a higher percentage, making borrowing for both working capital and expansion prohibitive; forcing some businesses to close shop of down-size as access to capital takes a knock. This has left a trail of ‘delinquent loans’.

The increase in the bank rate came just days after the RBM had devalued the local currency by nearly 50 percent and subsequently floated it to be controlled by forces of demand and supply. Since the shock devaluation of the kwacha, local depositors’ demands. The lending rates above 40 percent, makes credit out of reach for most firms and individuals.

“Financial inclusion or being “banked “can be transformative, as it allows poor people to build a more secure future. The ability to save and borrow allows them to build their assets, start a business, invest in education, establish a credit rating, and eventually own a home, “says the World Bank report of 2012. But for local entrepreneur Banda, he is not amused at all.

“I would rather borrow from friends or Katapila [money loskers] than trouble myself borrowing from the bank at that high risk lending rates, and collateral issue, “he says.

Minister of trade Josephy Mwanamveka says no country can hope to achieve sustainable economic growth without expanding and diversifying trade with small businesses.

“A vibrant small and medium enterprises sector can become a catalyst for accelerated economic development for Malawi,” he says.

Indeed, the banking system is the heart of any country’s economy. It is the major savings vehicle for the population and, at the same time pumps the money required for the economy to grow and for business to develop. This role for the banks is particularly true for developing countries such as Malawi, as they typically do not have developed capital markets. In this scenario, bank credit or loan makes up most of funds businesses and individuals need to grow.

Thus, without those of the funds or borrowed at a high-rate, companies and individuals cannot develop and the much-needed jobs cannot be created.

 

ShareTweetSend

Related Posts

The Great Muslim Defection: How Malawian Muslims Are Abandoning UDF Loyalty
Analysis

𝗛𝗜𝗦𝗧𝗢𝗥𝗜𝗖 𝗩𝗜𝗖𝗧𝗢𝗥𝗬: 𝗖𝗵𝗮𝗸𝘄𝗲𝗿𝗮 𝗗𝗲𝗹𝗶𝘃𝗲𝗿𝘀 𝗪𝗵𝗮𝘁 𝟲𝟬 𝗬𝗲𝗮𝗿𝘀 𝗼𝗳 𝗟𝗲𝗮𝗱𝗲𝗿𝘀 𝗡𝗲𝘃𝗲𝗿 𝗖𝗼𝘂𝗹𝗱—𝗢𝗳𝗳𝗶𝗰𝗶𝗮𝗹 𝗥𝗲𝗰𝗼𝗴𝗻𝗶𝘁𝗶𝗼𝗻 𝗼𝗳 𝗘𝗶𝗱 𝗮𝗹-𝗔𝗱𝗵𝗮

by Marshall Dyton
June 7, 2025
0
0

𝐴 𝑃𝑒𝑛𝑡𝑒𝑐𝑜𝑠𝑡𝑎𝑙 𝑃𝑟𝑒𝑠𝑖𝑑𝑒𝑛𝑡 ℎ𝘢𝑠 𝐺𝘪𝑣𝘦𝑛 𝑀𝑎𝑙𝑎𝑤𝑖𝑎𝘯 𝑀𝑢𝑠𝑙𝑖𝑚𝑠 𝑇ℎ𝑒𝑖𝑟 𝐺𝑟𝑒𝑎𝑡𝑒𝑠𝑡 𝑇𝑟𝑖𝑢𝑚𝑝ℎ 𝑖𝑛 𝐻𝑖𝑠𝑡𝑜𝑟𝑦

Read more

The Wrong Sacrifice: How Muslims in Malawi Are Slaughtering Community Unity Instead of Goats This Eid

The Stage He Chose: Dr. Namadingo’s Unscripted Performance in Wakata

Finding Balance – How One Nurse’s Story Inspired a Return to Prayer

Broken Trust: How Lack Of Transparency Derailed The Mufti-Abbas University Dream

From 13 Points to Nation-Builder: Habibu’s Journey of Purpose

  • Sheikh Yahya

    Ya Sheikh, Can You Hear Us Weeping? A Community’s Heartfelt Farewell to Sheikh Hubdein Yahya

    0 shares
    Share 0 Tweet 0
  • Broken Trust: How Lack Of Transparency Derailed The Mufti-Abbas University Dream

    0 shares
    Share 0 Tweet 0
  • Police warn Malawians against sending money to unknown Facebook friends

    0 shares
    Share 0 Tweet 0
  • Sacred Care: Muslim Nurse’s Mission of Mercy

    0 shares
    Share 0 Tweet 0
  • Pastor Builds Grass-thatched Mosque

    0 shares
    Share 0 Tweet 0
  • Trending
  • Comments
  • Latest
Sheikh Yahya

Ya Sheikh, Can You Hear Us Weeping? A Community’s Heartfelt Farewell to Sheikh Hubdein Yahya

April 4, 2025
Broken Trust: How Lack Of Transparency Derailed The Mufti-Abbas University Dream

Broken Trust: How Lack Of Transparency Derailed The Mufti-Abbas University Dream

May 4, 2025
Police warn Malawians against sending money to unknown Facebook friends

Police warn Malawians against sending money to unknown Facebook friends

December 24, 2019
Sacred Care: Muslim Nurse’s Mission of Mercy

Sacred Care: Muslim Nurse’s Mission of Mercy

May 1, 2025

Malawian Muslims Chased at Asian Muslims Milad–un-Nabee Feast

78

Supreme Council of Ulama Says Eid Adha Tuesday

28

Fatima Rajab the Guardian Angel, Abandoned for Refusing to Denounce Islam

24

MACRA BANS RADIO ISLAM PROGRAM

20
The Great Muslim Defection: How Malawian Muslims Are Abandoning UDF Loyalty

𝗛𝗜𝗦𝗧𝗢𝗥𝗜𝗖 𝗩𝗜𝗖𝗧𝗢𝗥𝗬: 𝗖𝗵𝗮𝗸𝘄𝗲𝗿𝗮 𝗗𝗲𝗹𝗶𝘃𝗲𝗿𝘀 𝗪𝗵𝗮𝘁 𝟲𝟬 𝗬𝗲𝗮𝗿𝘀 𝗼𝗳 𝗟𝗲𝗮𝗱𝗲𝗿𝘀 𝗡𝗲𝘃𝗲𝗿 𝗖𝗼𝘂𝗹𝗱—𝗢𝗳𝗳𝗶𝗰𝗶𝗮𝗹 𝗥𝗲𝗰𝗼𝗴𝗻𝗶𝘁𝗶𝗼𝗻 𝗼𝗳 𝗘𝗶𝗱 𝗮𝗹-𝗔𝗱𝗵𝗮

June 7, 2025
The Wrong Sacrifice: How Muslims in Malawi Are Slaughtering Community Unity Instead of Goats This Eid

The Wrong Sacrifice: How Muslims in Malawi Are Slaughtering Community Unity Instead of Goats This Eid

June 5, 2025
The Stage He Chose: Dr. Namadingo’s Unscripted Performance in Wakata

The Stage He Chose: Dr. Namadingo’s Unscripted Performance in Wakata

May 10, 2025
Finding Balance – How One Nurse’s Story Inspired a Return to Prayer

Finding Balance – How One Nurse’s Story Inspired a Return to Prayer

May 10, 2025

Connect

Recent News

The Great Muslim Defection: How Malawian Muslims Are Abandoning UDF Loyalty

𝗛𝗜𝗦𝗧𝗢𝗥𝗜𝗖 𝗩𝗜𝗖𝗧𝗢𝗥𝗬: 𝗖𝗵𝗮𝗸𝘄𝗲𝗿𝗮 𝗗𝗲𝗹𝗶𝘃𝗲𝗿𝘀 𝗪𝗵𝗮𝘁 𝟲𝟬 𝗬𝗲𝗮𝗿𝘀 𝗼𝗳 𝗟𝗲𝗮𝗱𝗲𝗿𝘀 𝗡𝗲𝘃𝗲𝗿 𝗖𝗼𝘂𝗹𝗱—𝗢𝗳𝗳𝗶𝗰𝗶𝗮𝗹 𝗥𝗲𝗰𝗼𝗴𝗻𝗶𝘁𝗶𝗼𝗻 𝗼𝗳 𝗘𝗶𝗱 𝗮𝗹-𝗔𝗱𝗵𝗮

June 7, 2025
The Wrong Sacrifice: How Muslims in Malawi Are Slaughtering Community Unity Instead of Goats This Eid

The Wrong Sacrifice: How Muslims in Malawi Are Slaughtering Community Unity Instead of Goats This Eid

June 5, 2025
The Stage He Chose: Dr. Namadingo’s Unscripted Performance in Wakata

The Stage He Chose: Dr. Namadingo’s Unscripted Performance in Wakata

May 10, 2025

Faith Podcast

Swalah 101

Ramadhan

Islamic Finance

Akudziwanji Za Chisilamu

Categories

  • Analysis
  • Business
  • Column
  • Crime and Society
  • Culture
  • Economy
  • Education
  • Entertainment
  • Featured
  • General
  • Health
  • International
  • Lifestyle
  • Opinion
  • Politics
  • Religion
  • Sports
  • Travel

News in Pictures

Amir Jakhura
Amir Jakhura Addressing the Journalists
Some of the beneficiaries

© 2022 Malawi Muslims Official Website -Website by Freelance Web Solutions.

No Result
View All Result
  • Home
  • Religion
  • Business
  • Health
  • Education
  • Entertainment
  • Politics
  • Sports
  • World

© 2022 Malawi Muslims Official Website -Website by Freelance Web Solutions.

Welcome Back!

Login to your account below

Forgotten Password?

Retrieve your password

Please enter your username or email address to reset your password.

Log In

Add New Playlist

Are you sure want to unlock this post?
Unlock left : 0
Are you sure want to cancel subscription?
-
00:00
00:00

Queue

Update Required Flash plugin
-
00:00
00:00