By James Woods*
Malawi’s GDP per capita fell for the fourth consecutive year in 2025. Its banks had the best year in their history.
Seven of eight commercial banks made a combined K820 billion in profit. Not revenue. Profit, after tax. NBM posted K197 billion, more than double what it made two years ago. NBS Bank K150 billion, up from K29 billion in 2023. FDH Bank K147 billion, doubled in a single year.
These are not numbers from a thriving economy. They are numbers from an economy that has found a way to make poverty pay, provided you are positioned correctly within the system.
The positioning is this. Malawi’s government spends more than it collects. It has done so for years across multiple administrations, and it covers the gap by issuing treasury bills and bonds to commercial banks. The banks buy them. Through 2025, banks were charging customers an average lending rate of 37.3 percent. This week, following a series of cuts that began after the Reserve Bank reduced its policy rate from 26 percent to 24 percent in March, the reference lending rate reached 20.6 percent. Philip Madinga, CEO of Standard Bank Malawi and president of the Bankers Association of Malawi, confirmed the cuts as welcome while acknowledging their sustainability depends on inflation. Analysts are less diplomatic. Misheck Esau of Nico Capital said publicly: this is not enough. For the private sector to thrive, Malawi needs significantly lower rates than these. The K820 billion shown above was earned before any of these adjustments. The timing of the generosity is worth noting.
The average rate banks pay depositors is 4.3 percent. The spread between those two numbers, 33 percentage points at its peak, is not a market outcome. It is structural extraction. Every kwacha the government borrows from its own banking sector at those rates flows directly from public accounts into private balance sheets, compounding annually, guaranteed, risk-free, while the productive economy that should be financing Malawi’s future goes without credit.
NBM alone held K628 billion in government fixed income securities in 2024, a 65 percent increase in a single year. The bank’s loan book to private customers grew 15 percent in the same period. The arithmetic of that choice is not accidental. When the government offers risk-free returns on paper that dwarf what any business borrower can sustainably repay, no commercially rational institution will choose the complexity and default risk of lending to a farmer in Kasungu or a manufacturer in Blantyre. Private sector credit is not crowded out by accident. It is crowded out by design, even if nobody designed it with that intention. Domestic borrowing now accounts for K14.56 trillion, 65 percent of Malawi’s total public debt. In 2023 it was 40 percent. That trajectory is not a statistic. It is a verdict on a decade of fiscal choices.
The people collecting these profits are worth identifying. Press Corporation Limited, a Malawian private conglomerate, owns 51.73 percent of NBM. Old Mutual Group of South Africa holds 24.83 percent. FDH Financial Holdings, a Malawian private group, controls 74 percent of FDH Bank. Standard Bank’s earnings flow to its parent in Johannesburg.
This is not primarily a story of foreign capital extracting Malawi’s wealth, though that element exists.
It is a story of Malawian private capital feeding on Malawian public debt while 76.6 percent of the population lives below the poverty line. FDH Bank’s share price has risen from K10 at its 2020 IPO to K592.99 today, a return of 5,830 percent, in a country whose GDP per capita has declined for four consecutive years.
The cost of maintaining this system is on every page of the 2026/27 national budget. Malawi will pay K2.793 trillion in debt interest this year. That is 43 percent of projected domestic revenue. Finance Minister Mwanamvekha confirmed publicly that in 2025/26, interest payments consumed 51.2 percent of domestic revenues before a single teacher was paid, before a drug reached a hospital, before a kilometre of road was repaired. The entire national health budget is K1.02 trillion. The entire agriculture budget K931 billion. The interest bill exceeds both combined. This is the invoice for years of borrowing from a banking sector that had every incentive to keep lending and no incentive to stop.
The one institution in Malawi doing what the entire sector should be doing is the Export Development Fund, wholly owned by the Reserve Bank. In 2024, EDF cut its government securities holdings by 78 percent and directed 34 percent of its assets to private sector productive lending. Its loan recovery rate is 85 percent. It is smaller than any commercial bank and operates with a fraction of their capitalisation. It is the proof of concept for what development finance can do when the mandate is correct and the incentives are aligned. The fact that it remains a small institution while commercial banks accumulate K9.9 trillion in assets off the back of government paper is a governance failure of the first order.
The government has begun pushing back. Since January 2026, Treasury has been rejecting large T-bill bids in what officials call auction discipline, turning away over K540 billion in applications between January and late February alone to force yields lower. The Reserve Bank has signalled it wants banks to redirect toward the productive sector. Finance Minister Mwanamvekha has asked publicly who would borrow at 37 percent. The answer, apparently, was: until recently, everyone who had no choice.
It cannot stay there. The RBM must impose a mandatory productive sector lending ratio on every bank holding a licence in Malawi, with a defined minimum of each institution’s portfolio directed to agriculture, manufacturing, and small business at regulated rates. The spread between lending and deposit rates, which reached 33 percentage points through 2025, has begun to narrow only now that fiscal pressures are easing. That it required a fiscal crisis to move it is itself the argument for structural intervention, not market patience. Banking profits derived from government securities above a defined threshold should attract a windfall levy that contributes to the fiscal stabilisation the current system actively prevents. The EDF model must be scaled aggressively, with the capitalisation and statutory mandate to close the credit gap that commercial banks have rationally chosen not to fill.
None of this changes without an IMF programme, and Malawi does not currently have one. The $175 million Extended Credit Facility approved in November 2023 automatically terminated on May 14, 2025, after the previous government failed to complete a single programme review in eighteen months. Only $35 million was disbursed. Finance Minister Mwanamvekha attended the IMF and World Bank Spring Meetings in Washington in April 2026 and reported that the IMF had positively assessed Malawi’s macroeconomic fundamentals under the new administration. Talks are described as productive. No programme has been signed and no timetable has been given. In the meantime, the government is financing itself through a World Bank Rapid Response Facility, an $80 million World Bank grant, and a $120 million Afreximbank loan being negotiated to purchase fuel. These are emergency instruments. They are not a strategy. Public debt has now exceeded 90 percent of GDP, and 65 percent of it is domestic, sitting on the balance sheets of the very institutions whose profits this piece has been documenting. Every month without a programme is another month in which domestic borrowing substitutes for the concessional external financing that would reduce the government’s dependence on a banking sector that profits from the habit.
Malawi has more than 21 million people. Seven banks made K820 billion from their debt last year. The Finance Minister himself asked who would borrow at these rates. The answer is a government that has no other choice, and a banking sector that has made that absence of choice the foundation of its business model. Changing that is not a technical question. It is a political one, and it has been deferred across enough administrations to constitute a choice in itself.
*James Woods is a geopolitical intelligence and strategic communications professional. He served as a Senior Diplomat at the Mission of Malawi to the European Union and is a former senior staffer at the Mo Ibrahim Foundation. He holds an Executive MBA from the University of Oxford and a Master’s from the London School of Economics. He is an
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