Banks have slighlty lowered their base lending rate to 25.20 percent this month from 25.30 percent last month following a decline in Treasury Bill (Tbill) yields. Both the Bankers Association of Malawi (BAM) and Financial Market Dealers Association (Fimda) confirmed this in separate interviews, highlighting that even small changes influence lending rates and credit costs. Reads National Bank’s published notice: “We wish to advise our valued customers and all stakeholders that the reference rate for January is 25.20 percent a decrease from 26.30 percent recorded in December 2025.
The rate is effective January 6 2026.” This comes at a time the Reserve Bank of Malawi (RBM) hinted at the possible downward revision of the policy rate if inflation keeps decelerating on account of easing food prices. In an interview, BAM President Phillip Madinga, who is also Standard Bank plc chief executive, said the slight change follows the monthly review, driven by a drop in Treasury bill yields. Madinga said: “The all-type average yield decreased to 22.68 percent from 23.14 percent, due to non-allotment on the 364-day tenor [26 percent yield] in late December 2025.
The reference rate, reviewed monthly, aligns with economic indicators like inflation, liquidity and deposit costs. “This 0.1 percent cut slightly eases loan servicing for clients. The adjustment signals modest easing in cost-of-funds and market conditions.
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As the benchmark for loan pricing, even small changes influence lending rates and credit costs.” In a separate interview, Fimda president Leslie Fatchi concurred with Madinga on the factors behind the slight easing, but highlighted that the policy rate remains key on reference rate direction going forward. “The drop is informed by a reduction in the all type Tbill rate [which has 10 percent weight in the calculation of the referenc rate] which dropped in the month under review. “It has to be highlighted that the drop was more on the technical side than market conditions as all the auctions conducted during the month were closed at the same rates as the previous month, with the difference being that other T bill tenors were not auctioned during the month,” Fatchi said.
Looking forward, Fimda anticipates the reference rate to take the direction of the key parameters used in the calculation, with the Lombard rate taking the biggest weight(64.80 percent), and the overnight Interbank rate taking 25 percent, with all type Tbill rate weight at 10 percent. “To that effect, the direction of the policy rate[which guides the Lombard rate[ as informed by levels of inflation in the economy, and the liquidity levels which guide the overnight interbank rate will continue to be key drivers of the reference rate, besides the All type T bill rate as has been seen during the month under review,” he adds. Meanwhile, Malawi Union of Small and Medium Enterprises president James Chiutsi observed that the recent rate cut, while a positive move, may not be substantial enough to significantly impact SMEs, especially given that they are classified as high risk. Chiutsi said: “A more substantial rate cut could have a greater impact on small businesses, enabling us to access finance more affordably and potentially leading to increased investment, growth, and profitability.”
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