Bank Association of Malawi (BAM) has defied Vice-President Saulos Chilima's directive that banks should reduce interest rates in the country as they are making obscene profits at the expense of poor Malawians.
In an interview with Zodiak Broadcasting Station on Sunday, a confident and highly charged BAM Chief Executive Officer Lynses Nkungula said it was not true that banks make a lot of profit from interest of customers' loans.
"Banks make a lot of investments for them to make profits. It's not true that we make a lot of money through loans because we also make money through other avenues such as international trade.
"If banks do not make profits then it is a cause for concern as the economy can collapse which can have an serious impact on the economy."
Nkulungula said the solution was not for the banks to reduce lending rates, but for the government to find other means of reducing imports and increasing exports to improve for in the country.
She also said the government's domestic borrowing appetite crowds out small-scale business entrepreneurs as they face stiff competition from what the CEO branded the 'Big Brother.'
"The government should do something about domestic borrowing from the local banks as it gives banks a viable client as they offer high rates. If the government educes domestics borrowing it will give small scale entrepreneurs a bargain," said Nkungula.
On VAT, she remained defiant saying this is supposed to be met by customers.
"Valued Added Tax is the tax which is supposed to be passed on to customers and not banks. That's why whenever a customer buys an item, it is indicated on the receipt the price as well as Value Added Tax separately," she said.
Vice-President Chilima made the directive a couple weeks during the Institute of Chartered Accountants in Malawi workshop, saying the issue is non-negotiable as in the past there lending rate was lower while there were a few banks.
He said with the higher number of banks, the lending rate should have been lower than the 25.67 percent as quoted in 2019.