By Collins Mtika
A growing number of Malawians are struggling to repay microfinance loans as the country grapples with a deepening economic crisis. The situation is particularly dire for small businesses, which have been hit hard by soaring inflation, food shortages, and a depreciating currency.
Sarah Mwanza, a small business owner in Lilongwe, is among those facing financial hardship. Despite borrowing 200,000 Malawian Kwacha to start her vegetable stand, she now owes over 500,000 Kwacha. “I don’t know how I’ll pay it back,” she says, her voice trembling.
The situation is alarming, according to Dr. Wilson Banda, Governor of the Reserve Bank of Malawi (RBM). Non-performing loans across the banking sector have surged to 6.1%, surpassing the critical 5% threshold that typically signals systemic risk.
“We’re witnessing a perfect storm,” Banda explains. The agriculture and retail sectors, which together account for over 77% of industry credit, are under immense strain.

A recent analysis of 2,000 loan applications reveals that nearly 40% of small business owners are trapped in cycles of multiple borrowing.
The crisis has been exacerbated by a confluence of factors. Soaring inflation, now at 28.8%, has made it difficult for businesses and households to afford basic goods and services. Acute food shortages, caused in part by climate change and geopolitical tensions, have further strained the economy.
And the dramatic 44% devaluation of the Malawian Kwacha has made imports more expensive, driving up prices for consumers.
The microfinance sector, once hailed as a solution for financial inclusion, is now teetering on the brink of crisis. The sector’s lending ratio has skyrocketed to an alarming 388%, meaning institutions are borrowing nearly four times what they can sustainably manage.
“Last month alone, we received 127 complaints about predatory lending practices,” Banda says.

The complaints range from excessive interest rates to aggressive collection tactics. One case file shows a farmer who took three simultaneous loans from different institutions, each unaware of the others.
The pension sector adds another layer of complexity to RBM’s regulatory challenges. Despite growing assets, mounting contribution arrears, and widespread non-compliance with pension laws threaten the retirement security of thousands of workers.
Recent data shows that 35% of eligible employers have failed to remit pension contributions for over six months.
The RBM is working to address the crisis through a combination of monetary and regulatory measures. However, the challenges facing Malawi’s economy are significant, and it is unclear whether the central bank will be able to stabilize the situation.