The depressed economic environment characterised by high inflation and interest rates has affected borrowers who are struggling to service their loans, financial statements of some commercial banks show.

In its published financial results for the period ended December 31 2022, Malawi Stock Exchange (MSE)-listed Standard Bank plc indicated that credit impairments were up due to growth in the customer loan book which resulted in increase of credit impairments.

Similarly, NBS Bank plc indicated that elevated interest rates potentially increased credit impairments as loans and advances rose by 68 percent from K82 billion in 2021 to K138 billion in the review period.

FDH Bank plc financial statement also showed that it registered an increase in net impairment charges due to increased expected credit losses on some accounts.

According to the data, Standard Bank plc’s expected credit losses as at December 2022 stood at K5.4 billion up from K3.6 billion in 2021 while outstanding loans in the period totalled K250 billion from K216.6 billion.

Commenting on banks’ performance, financial market analyst Bond Mtembezeka said this shows that borrowers were strained over time with high interest and inflation rates.

“When the economy is not doing well, businesses also do not perform as a result likelihood that they will fail to service debt obligation rises. We are in a period of economic turmoil,” he said.

Malawi University of Business and Applied Sciences associate professor of economics Betchani Tchereni said the development reflects the tough economic environment.

“The economy of Malawi has faced challenges emanating from a number of exogenous factors. Many people lost their jobs, some companies had to downsize and some even closed down,” he said.

Speaking during  an investors forum in Blantyyre on Friday, FDH Bank plc managing director Noel Mkulichi admitted that elevated non-performing loans is becoming an issue highlighting that the bank will continue to pursue prudent credit management tools to minimise the credit risk.

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