Upward adjustment of lending rate to shake SMEs

One of the country’s economist, Sam Chiwaula, has warned that the increase in lending rates by some commercial banks will lead to a negative impact on women and youth, most of whom run Small and Medium Enterprises (SMEs).

The economist was reacting to a recent rise in lending rates by FDH Bank and My Bucks banking Corporation.

Effective January 6, 2020, the two institutions raised their lending rates to 13.1%.

Chiwaula expressed surprise that the rising of the rates have been made barely a few months after the central bank reduced its lending rate.

He said: “The commercial banks should have also reduced their lending rate considering the downward adjustment of the lending rate at the central bank.”

He further warned that the development will force SMEs to raise prices of their commodities and in turn consumers will not afford to purchase.

“Cost of production will be high as such prices will go up and demand for the products will be low making it difficult for the business persons to realize profits.” He lamented.

SMEs play a crucial role in the development of any country’s economy and in Malawi they account for about half of the country’s Gross Domestic Product (GDP).

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