Malawi: Parliament Soliciting Expert Views On Interest Rate Capping Law - 'Banks Should Not Steal From Malawians'

13 February 2019

Malawi Parliament has started soliciting views on interest rate capping bill which an opposition legislator moved in the 193 strong House to stop commercial banks from charging high interest rates.

Alekeni Menyani, the chairman of the joint Public Affairs Committee, Women Caucus and Government Assurance Committee said there was indeed need for a law to regulate bank interest rates.

"But all the players should discuss this important issue with sober minds. There should not be emotions. We should all be guided by facts," said Menyani.

Chairlady of Women Caucus Jessie Kabwila said the bill was very important for women.

"The high interest rates deter most women from getting bank loans, this is why they are not doing well in their businesses. This is a hindrance to the progress of women in the country," she said.

Malawi Congress Party (MCP) member of Parliament for Dowa West Constituency, Alexander Kusamba Dzonzi, who also tabled the Private Member's Bill in Parliament in December, said the latest reduction of bank interest loans was politically motivated, saying this shows it was possible to put a cap on the interest rates.

"The Reserve Bank of Malawi has reduced the bank rates drastically due to politics but the economy has not collapsed," he said.

RBM spokesperson Mbame Ngwira says the decision to reduce the interest rates was not political, saying the central bank is independent.

Bankers Association of Malawi (Bam) president, Paul Guta, said while commercial banks agree that interest rates are high in the country, there is a need to do the right things rather than capping.

Reserve Bank of Malawi (RBM) Governor Dalitso Kabambe is on record as having said the monetary authority has had a lot of intervention on interest rates, but whether the current policy is the right framework in place or there is need to revisit the policy is up to players in the industry to discuss.

Interest rate capping is a regulatory measure that prevents banks or other financial institutions from charging more than a certain level of interest.

Currently, commercial banks have pegged their base interest rates between 23 percent and 27 percent.

The Bill, which proposes to cap the interest rate applicable on the credit facility to a certain percentage above the prevailing policy rate for lenders and below the same policy for depositors, was first tabled in Parliament in December under the Private Members Bill by Dowa West legislator, Kusamba Dzonzi.

Investment and property portfolio management firm Alliance Capital Limited (ACL) has said the debate on interest rate capping should not be dismissed outright on account of unintended consequences experienced in some countries.

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