28 November 2017

Mozambique: Finance Minister Urges Banks to Cut Interest Rates

Photo: Pixabay
(file photo).

Maputo — Mozambican Finance Minister Adriano Maleiane on Monday urged the country's commercial banks to cut their interest rates, which are throttling Mozambican businesses.

Speaking at the launch of the latest research on the country's banking sector, organised by the consultancy company KPMG, and the Mozambican Association of Banks (AMB), Maleiane said there is "a lack of clarity in defining the price of money", and he urged the banks to publish the rules for establishing interest rates for the various categories of loans that they grant.

Despite gradual reductions in the benchmark interest rates charged by the Bank of Mozambique, the rates charged by the commercial banks remain extremely high, at around 30 per cent. The annual inflation rate has now fallen to below ten per cent, but this too has had no impact on the banks as they pile up huge profits.

"It seems we have a lot of work to do for transparency and for fixing interest rates", said Maleiane. "Apparently, those who look at our interest rates may understand that there is no connection between the costs of funding, inflation and risk. It seems that these things are rather dissociated. So I'm challenging the financial system to bring me a reference rate. I'd like to see a reference rate for 90 days, 180 days, 360 days. I hope that the sector will explain".

Outside the country, the impression was that somehow the authorities fix the interest rates - but this was untrue, Maleiane stressed. "You (the banks) are fixing the interest rates, and the argument you present is that it's the responsibility of the central bank, but the central bank denies that", he said. "There is an agreement under which you fix the cost of the risk premium. This premium is there, and nobody knows how it moves. It's important that we, the consumers, can know".

The performance of the financial sector suffered from the crisis into which the Mozambican economy plunged last year. Data provided at the meeting shows that the credit provided by the banks to the economy fell by 25 per cent between 2016 and 2016, and that the proportion of non-performing loans increased by 66 per cent.

In terms of assets, lending and deposits taken together, the Commercial and Investment Bank (BCI), has become the largest commercial bank in the country, overtaking the Millennium-BIM (International Bank of Mozambique). In third and fourth place are Standard Bank and Barclays-Mozambique. But Millennium-BIM remains the most profitable bank in Mozambique.

More on This

Central Bank Cuts Interest Rates

The Monetary Policy Committee of the Bank of Mozambique on Thursday announced a reduction of 50 base points in the… Read more »

See What Everyone is Watching

Copyright © 2017 Agencia de Informacao de Mocambique. All rights reserved. Distributed by AllAfrica Global Media (allAfrica.com). To contact the copyright holder directly for corrections — or for permission to republish or make other authorized use of this material, click here.

AllAfrica publishes around 700 reports a day from more than 140 news organizations and over 500 other institutions and individuals, representing a diversity of positions on every topic. We publish news and views ranging from vigorous opponents of governments to government publications and spokespersons. Publishers named above each report are responsible for their own content, which AllAfrica does not have the legal right to edit or correct.

Articles and commentaries that identify allAfrica.com as the publisher are produced or commissioned by AllAfrica. To address comments or complaints, please Contact us.