Mozambique should find ways of reducing interest rates applied by retail banks, which are high and make access to credit by the public difficult, the resident representative of the International Monetary Fund (IMF) in Mozambique said recently.
“One challenge that remains is the need to set up conditions to allow a drop in the interest rates applied by banks, which are still quite high,” said Alex Segura, cited by Mozambican news agency AIM.
The news agency added that there were complaints about the high rates of interest charged by retail banks in Mozambique, despite the central bank reducing its benchmark rates.
The Bank of Mozambique’s interest rate on its permanent loan liquidity facility is 8.25 percent, but retail banks are charging an average of 20 percent.
According to Segura, credit to the private sector posted year-on-year growth of 35 percent in 2013, but that growth has yet to come into line with the rate at which the benchmark interest rate is dropping.
“There’s a disconnect between the drop in interest rates by the central bank and the interest rates of the retail banks, which are still at quite high levels,” said Segura adding that “the challenge is to identify the structural factors that allow banks to reduce their interest rates.” (macauhub)