By Patricia Kapulula
Minister of Finance, Economic Planning and Development, Joseph Mwanamvekha has bemoaned the loan default culture by some business community in the country saying such a tendency has led the financial sector to face challenges.
He made the remarks in Lilongwe on Thursday during the launch of the National Bank of Malawi (NBM) Development Bank.
He said such a culture is killing the Small and Medium Enterprises (SMEs) as some have lost trust in them hence cannot be accorded loans due to repayment default of others.
“This culture prognoses the instability of the financial system in the country and discourages institutions from financing or lending to SMEs,” the Minister said
Mwanamvekha appealed to Malawians to start taking responsibility for their actions and respect agreements put in place by servicing their loans once they are borrowed.
The NBM Development Bank, the first ever private sector led development institution to be set up in the country, intends to support businesses as way of creating enterprises.
For this reason, Mwanamvekha said, the intention cannot materialize if SMEs opt to default loan payment.
He cautionedinstitutions and even individuals to desist from this behaviour saying failure to do so will lead to the law taking its course.
“There are business persons out there who roam from one bank to the other with the plan and objective of defaulting payment. Even for enterprises that are making money enough to cover their operations and even to pay loans, would deliberately choose to default.
“When the finance providers demand payment from them they would rush to the courts to take an injunction although it is clear that they have borrowed and have failed to pay,” the Minister said.
Mwanamvekha said government together with the Banks needs to make sure that the commercial court works so that this behaviour should be reduced while at the same time ensuring that credit reference bureaus are working and playing their role in ensuring that this behaviour is brought to an end.
He observed that despite being at the heart of government’s development agenda, SMEs face challenges in access to finance and as such the coming in of NBM Development Bank would work towards addressing that hence the need for SMEs to honour their loans by paying them.
Mwanamvekhacommended NBM for setting the pace by establishing the bank thereby complementing government’s efforts to industrialise the country and make Malawi a producing and exporting nation.
He appealed to the development bank to work towards addressing challenges that SMEs face.
Perceived high cost of borrowing, lack of technology and work process integration as well as lack of skills needed to manage enterprises effectively, are some of the challenges that SMEs face.
NBM Development Bank Chairperson, who is also NBM Chief Executive Officer,MacFussy Kawawa said the Bank brings a difference in the sense that it is what the market has been waiting for in the sense that currently commercial banks target has been mostly for short term lending.
“We are looking forward to helping those that have projects or have ideas that have to be translated into projects that have long term tenure to start bringing in cash flows.
And in doing so we believe we will contribute towards the creation of employment and the growth of businesses that the country will very much need,” he said.
NBM Development Bank is 100 percent owned subsidiary of National Bank of Malawi meant to support start up as well as existing businesses.
It is the transformation of Inde Bank which NBM acquired in 2015 whose aim for the acquisition was to transform it (Inde Bank) to its original mandate of providing long term financing to SMEs.