Malawi's private sector credit is now growing mainly because households are borrowing more money, not because businesses are investing in production. This shift shows that the economy is being driven by survival spending rather than real economic growth, and economists warn it could worsen inflation and weaken Malawi's future prospects.
Data from the Reserve Bank of Malawi (RBM) show that between January and November 2025, most new lending went to community, social and personal services. This category is dominated by household loans used for daily needs such as food, rent, school fees and other basic expenses.
By November, this sector accounted for 40 percent of all private sector credit, making it the largest borrower in the economy. It overtook key productive sectors like agriculture and manufacturing.
At the same time, lending to sectors that actually produce goods declined. Agriculture's share of credit fell from 24 percent in mid-year to 19.6 percent in November. Manufacturing dropped from a peak of 23 percent in September to 19.9 percent in November. Wholesale and retail trade also recorded declines, showing that businesses are struggling to access or use credit.
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Mzuzu University economics lecturer Christopher Mbukwa said this pattern shows that people are borrowing mainly to cope with daily life, not to expand productive activity. He said even though some households run small businesses, most of the borrowed money is used for consumption rather than investment.
Mbukwa warned that this type of borrowing fuels inflation because it increases demand without increasing supply. He said when more money goes to consumers but production remains weak, prices rise because too much money is chasing too few goods.
He added that household credit boosts spending but does not build productive capacity, since little is invested in assets like machinery, farming inputs or factories. To reverse this trend, Mbukwa said Malawi needs policies that make it easier for small and medium enterprises to access credit, while ensuring that loans are used for productive purposes.
Scotland-based Malawian economist Velli Nyirongo said the current credit pattern sends mixed signals about the state of the economy. He said rising household borrowing shows better access to banking and short-term consumer confidence, but also reveals a weak productive base.
Nyirongo said many firms, especially in manufacturing, agro-processing and export sectors, are constrained by high interest rates and policy uncertainty. As a result, they are not borrowing enough to expand production.
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He warned that when credit growth is driven by consumption instead of investment, economic growth becomes fragile. He said the economy is being supported by today's spending rather than tomorrow's production.
Nyirongo added that household borrowing also puts pressure on inflation and the exchange rate, because much of the spending goes to imported and non-tradable goods while local output remains low. This means productivity does not improve, sustainable jobs are not created, and real wages remain weak.
Both economists said this trend undermines Malawi 2063, the country's long-term development plan, which depends on agriculture commercialisation, industrialisation and export growth. These goals require strong business investment, not just household spending.
Speaking earlier this year in Lilongwe, Standard Bank head of personal and private banking Charity Mughogho said the bank's loan book stands at about K400 billion, with a large portion in customer loans alongside lending to government.
Overall, the credit pattern shows that Malawi's economy is surviving rather than transforming. People are borrowing to get by, not to build productive businesses. This keeps money moving in the short term but does not create real growth, and risks trapping the country in high inflation, weak industries and low incomes.
