The Bankers Association of Malawi (Bam) has warned that persistently high interest rates are stifling credit demand across the country, discouraging both businesses and households from taking on new debt.
The industry body noted that commercial banks are currently sitting on excess cash, creating a paradox where liquidity is abundant but lending activity remains subdued due to the cost of borrowing.
This development underscores a broader challenge in emerging African markets, where monetary policy tightness often outpaces economic recovery.
While banks have the capacity to lend, the high cost of capital is effectively pricing out potential borrowers, leading to a stagnation in credit growth.
The situation mirrors trends seen in other jurisdictions where elevated borrowing costs have led to a decline in mortgage applications and consumer credit uptake.
The Reserve Bank of Malawi’s monetary stance remains a key factor in this dynamic.