Maputo — The Bank of Mozambique is not pleased with the commercial banks’ decision to maintain exorbitant interest rates, despite the central bank’s repeated reductions in its own reference rates.
The central bank’s key interest rate is the Standing Lending Facility. This is the interest rate paid by the commercial banks to the Bank of Mozambique for money borrowed on the Interbank Money Market. The Bank of Mozambique has cut this rate five times this year. At the beginning of 2012, the Standing Lending Facility rate was 15 per cent, and now it is 9.5 per cent.
But according to data published on Tuesday by the Bank of Mozambique, the average interest rates charged by the commercial banks remain over 20 per cent. The average interest rate fell from 22.4 per cent in June to 21.8 per cent in August – a fall of only 60 base points.
The banks are charging these scandalous interest rates at a time when inflation has virtually disappeared from the Mozambican economy. Indeed, the overall level of prices fell slightly in the first ten months of the year – inflation from January to the end of October, as measured by the consumer price indices of the three largest cities (Maputo, Beira and Nampula) was minus 0.11 per cent.
Speaking at a Maputo press conference on Tuesday, the spokesperson for the central bank, Waldemar de Sousa, said “We are not satisfied with the current level of interest rate”.
He hoped that “the alignment of the interest rates in the banking system with the reference indicators, including the central bank’s rates, will continue in the coming year”.
When the Bank of Mozambique reduces its own interest rates, it expects the commercial banks to follow suit, and to charge low interest rates for their clients. But the speed with which the commercial banks react to the decisions of the central bank is below what would be desired, said Sousa.
“The Bank of Mozambique has been cutting its master rates since September 2011, and we hoped that the commercial banks would accompany us with greater rapidity. Their alignment is happening with some timidity”, he said delicately.
The commercial banks cannot complain (as some of them could a decade ago) that they are saddled with mountains of bad debt. According to Sousa, the number of bad loans in the Mozambican banking system is on the increase, but is not a matter for alarm.
Sousa said that non-performing loans have risen, as a percentage of the credit portfolio of the commercial banks, from 1.9 per cent in 2010, to 2.6 per cent in 2011, to 3.5 per cent in September this year.
“Non-performing loans are tending to increase”, he said, “but there is no reason for concern, since the situation is not out of control”.
The growth in bad loans accompanies the growth in credit pumped into the economy since 2009, when the government authorised an expansion of credit to cushion the impact on Mozambique of the international financial crisis.
Most of the beneficiaries of bank loans are companies, rather than individuals. “After the crisis broke out in 2007, and worsened in 2008, the Bank of Mozambique decided to tolerate the granting of greater credit to the economy to soften the effects of the crisis. With the crisis the sources of financing are drying up”, Sousa said.
According to the central bank’s data, the indebtedness of private businesses to the Mozambican commercial banks stood at 106.21 billion meticais (3.6 billion US dollars at current exchange rates). This was a rise in company indebtedness of 10.3 per cent since September 2011.