Banks trim cost of borrowing to 20.8%

Commercial banks in the country have reduced their lending rates to 20.80 percent from 22.40 percent, the fourth consecutive time since February this year, making the cost of loans competitive. The lending rate cuts come at a time the Malawi Government has tamed its appetite to borrow from the domestic market, a development that has trimmed yields from Treasury bills (T-bills), prompting banks to target lending to private sector. Cumulatively, commercial banks have cut lending rates by 4.4 percentage points since February from 25.2 percent to 24.7 percent before dropping twice in March to 23.7 percent and 22.4 percent after the Reserve Bank of Malawi (RBM) cut policy rate from 26 percent to 24 percent.

In a notice posted on Facebook, Centenary Bank Limited informed the public about the cut in reference rate from Tuesday next week. “The applicable lending reference rate [which is also the base lending rate] for banking loans and overdraft had been revised from 22.40 percent to 20.80 percent effective Tuesday 7 April 2026,” reads a published notice from the bank,” reads the statement. Bankers Association of Makawi president Phillip Madinga in an interview yesterday said banks want to make loans competitive while maintaining risk management, stressing that its sustainability will depend on inflation direction.

“The reduction is a welcome signal. It reflects the gradual easing we have seen in lending rates since February and should, over time, lower the cost of credit for borrowers,” he said. Madinga, who is Standard Bank Malawi plc chief executive, said commercial banks can price loans more competitively while still maintaining prudent risk management.

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But while describing the cuts as welcome, financial analysts said they believes the reduction is not significant enough to bring meaningful change in investment climate, saying private sector growth needs low interest rates environment. In an interview, Nico Capital Limited chief executive officer Misheck Esau said: “Although this is welcome, I would say this is not enough. For the private sector to thrive we need significant cut of interest rates.

In a separate interview, investment analyst and former bank executive Benedict Nkhoma said the current drop of lending rates is consistent with the broader monetary policy direction but its future will depend on inflation direction. Between early January and early March, investors submitted bids of roughly K1.1 trillion for T-bills, but Treasury accepted only about K278 billion and rejected approximately K823 billion worth of bids, signalling an effort to push yields lower rather than absorb all available financing from the market. Speaking during a panel discussion held on the sidelines of the launch of the World Bank’s Malawi Economic Monitor in Lilongwe, Malawi Confederation of Chambers of Commerce and Industry president Wisely Phiri said rates would need to fall significantly before becoming accessible to most businesses.

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