Members of the private sector has asked for a thorough assessment of the impact to the economy and financial sector if Malawi is to pass a law on capping Interest Rates.
A capped rate is an interest rate that is allowed to fluctuate, but which cannot surpass a stated interest cap. A capped rate loan issues a starting interest rate that is usually a specified spread above a benchmark rate.
The views were shared at a consultative meeting organized by the Parliament of Malawi in Blantyre.
Addressing the meeting, Member of Parliament for Dowa West, Kusamba Dzonzi said the consultations follow a motion moved in Parliament in 2016 by Member of Parliament for Dedza North West Alekeni Menyani, after noting exorbitant interest rates on loans obtained from banks and other lending institutions which resulted in property loss due to non-payment.
“It is evident in this country that for a long time, the financial institutions have been charging unjustifiable and exorbitant interest rates,” He said.
President of Indigenous Business Association of Malawi (IBAM), Mike Mlombwa concurred with Dzonzi that there is need for deliberate policies such as capping of interest rates if SMEs are to survive.
“We have been attending such meetings, now it’s almost five years but the results are not coming out. There is need to expedite research and see if our economy can survive if caps are introduced,”
However, Bankers Association of Malawi President Paul Guta said the proposed bill could be solving symptoms instead of the root cause of high interest’s rates in Malawi.
“Let us find solutions of what should be done to the economy to have affordable interest rates. The high rates are as a result of so many factors that include; operational factors such as electricity and connectivity as well as inflation,” He said.