Ř Mr Modecai Msiska, Director, First Merchant Bank; Ř Management and Staff of the First Merchant Bank; Ř Distinguished Customers; Ř Ladies and Gentlemen…
It is with great pleasure that I accept the opportunity to participate in the official opening of the Mzuzu Branch of the First Merchant Bank. I am glad to note that First Merchant Bank, continues to expand its business since 1995 when we licensed it to operate in Malawi. The Mzuzu Branch increases the number of its satellite stations to 7. Drawing from my extensive experience in the commercial banking industry, this is no mean achievement. Allow me therefore, to extend my sincere congratulations to Management and staff of the First Merchant Bank for this development.
Having passed through a period of an unstable macroeconomic environment which was characterized by high inflation, high interest rates, an unstable exchange rate and weak GDP growth, a situation which had negative impact on the performance of the private sector, Malawi can now look into the future with renewed hope. The private sector, which is the engine for growth, will surely notice the difference. First Merchant Bank has an important role to play in these endeavours. Bringing banking services in Mzuzu is a step in the right direction and for this, First Merchant Bank should be applauded.
Distinguished Guests, Ladies and Gentlemen, Malawi's macroeconomic performance remains strong. Helped by sound macro-economic policies, a good harvest, and favorable external conditions, real GDP grew by 7.9 percent in 2006 and is projected to reach around 7.4 percent in 2007. Inflation has come down more quickly than expected, standing at 7.2 percent in October, down from about 17 percent early last year. The economy is projected to grow by 7.1 percent in 2008 while inflation is expected to remain in single digits despite the challenges posed by the recent hike in fuel prices.
Ladies and Gentlemen, the Reserve Bank is unrelenting in its supervision and regulatory activities of the banking sector. This is to ensure the highest international standards for our financial institutions. As Monetary Authorities, the Reserve Bank shall endeavor to implement measures to strengthen the financial sector so as to ensure financial stability for a more conducive business environment. These measures should support the already existing initiatives and policies to transform the economy from an importing and consuming nation to a producing and exporting one.
Recently, the central bank reduced the Bank rate from 17.5 percent to 15 percent effective November 1, 2007 in an effort to improve loan affordability and therefore, encourage investment in the economy. So far, financial statistics are pointing to positive results of such efforts. In fact private sector credit has grown substantially, e.g. 39.9 percent in October 2007 [year-on-year] and yet the financial system remains healthy and sound. Indeed, the share of private sector credit to total credit has also increased substantially, reversing the trend that saw the private sector marginalised. Private sector deposits at commercial banks have also trended upwards, reaching K60 billion by end-October from M47 billion during a similar period last year. Clearly this reflects increased public confidence in the soundness of the banking sector.
While the financial banking industry remains healthy, there are a number of challenges that we as a central bank have to deal with in the conduct of monetary policy. One such a challenge is the need to improve commercial bank’s responsiveness to our policy signal. Related to that is how to deal with the problem of negative real savings rates and wide spreads currently obtaining in the financial system. In part, the solution could be to reduce non- performing loans while at the same time improving efficiency. From our side there will be a regular review of monetary policy.
The financial sector also has to deal with problems of globalisation which has, in some countries, led to mergers and acquisitions. The Reserve Bank of Malawi will support banks seeking to consolidate in order to strengthen their position while at the same time ensuring that we continue to attract new players from the international community. I for one feel that it is high time the Malawian banking sector came of age to enhance its competitiveness at the global market.
Ladies and Gentlemen let me at this juncture concur with Mr Msiska in commending the First Merchant Bank on the role it plays in this country, including changing the face of our cities. It is not long ago when First Merchant Bank commissioned the magnificent Livingstone Towers in the City of Blantyre and today, we are witnessing the opening of the new FMB Mzuzu Branch which, I believe, has added some light to the City of Mzuzu.
Let me also encourage First Merchant Bank to establish as many branches as possible in other parts of the country and deepen its market share by also extending its services to small scale borrowers i.e. support small and medium scale enterprises.
Finally, let me once gain, congratulate Management and Staff of First Merchant Bank for yet another milestone in the growth of the bank. As Central Bank Governor, I pledge full support to the industry by ensuring that we maintain a stable macroeconomic environment in support of your operations.
A strong and efficient financial sector will not only benefit you and your shareholders, but also the country as whole through increased financial intermediation at reduced costs.
With these few remarks it is a pleasure, Ladies and Gentlemen, that I declare the Mzuzu Branch of the First Merchant Bank officially open.
I thank you for your attention I wish you a Merry Christmas and a Happy and Prosperous New Year.
Thank you.
Victor Mbewe December 10, 2007 |
