Businesses brace for tighter credit conditions

Malawi Confederation of Chambers of Commerce and Industry (MCCCI) says businesses are likely to face tighter access to credit as excess liquidity in the banking system prompts stricter monetary measures.

In its 2026 First Half Economic and Business Review, the chamber said this is despite the Reserve Bank of Malawi (RBM) efforts to lower borrowing costs.

The RBM cut the policy rate from 26 percent to 24 percent in the first quarter to support economic recovery before increasing the liquidity reserve requirement (LRR) for local currency deposits from 10 percent to 12 percent in April to absorb excess liquidity.

But the chamber said the policy mix reflects RBM’s attempt to stimulate growth without reigniting inflationary pressures.

Reads the review in part: “Although the reduction in the policy rate was intended to support economic recovery, the increase in the LRR [a fraction of banks’ deposits kept by the central bank without earning interest] served to sterilise excess liquidity, demonstrating the RBM’s cautious approach to preventing inflationary pressures from re-emerging.

“For businesses, this implies that although financing conditions may gradually improve, access to credit is likely to remain relatively constrained in the short term as commercial banks adjust to tighter liquidity conditions.”

In a Monetary Policy Committee (MPC) statement following its second meeting of 2026 held on April 29 and April 30, RBM Governor George Partridge, who chairs the MPC, said the decision to ease the policy rate reflected a cautious approach to consolidating recent gains in inflation reduction.

Treasury has remained optimistic and expects the rate to drop further to 18 percent due to anticipated improvements in agricultural productivity and fiscal consolidation efforts.

The post Businesses brace for tighter credit conditions appeared first on Nation Online.