Monday, December 26, 2011

Forex Shortages Hit Malawian Banks Hard

As the problem of foreign exchange shortage continues to bite, Authorized Dealer Banks (ADBs) have set different limits on the quantity of foreign exchange individuals can draw from personal and business
A snap survey conducted between Wednesday and Thursday revealed that banks remain the preferred sources of forex, although forex-counter personnel from all the ADBs visited said their forex reserves were dry.
These include Inde Bank, Standard Bank, NBS Bank, Malawi Savings Bank, National Bank, and FDX Forex Bureau. Forex buying rates in these financial institutions ranged from K161.19 to K161.98 while forex selling rates ranged from K165.28 to K168.115.
However, the ADBs differed on the issue of forex purchase-limits, with different players charging differently, depending on whether it is a business of personal account.
For example, while the forex-withdrawal limit for United States Dollars was 3000 at FDX Forex Bureau, at Nico complex in Blantyre, workers at Top Mandala Inde Bank said the bank has set no limits on the amount of foreign currency one can purchase.
However, customers using business accounts at National Bank Victoria Avenue Branch could purchase as much as 5000, in stark contrast to Standard Bank Blantyre Branch, where a counter official said the purchase limit on business accounts was US$3800, and those with personal accounts could not withdraw more than US$2,200.
One of the people who have been to different banks in search of forex, Kenwilliams Mhango, suspected that ADBs have set different limits on forex as one way of maintaining control over the little they have in forex reserves.
“However, I think this is not working because the forex is not there at all. Some people have been waiting for forex for six months now,” said Mhango.
Mhango said he knows of people who have been on the waiting list for eight months, noting that the situation was creating opportunities for parallel market trading.
The Bankers Association of Malawi (Bam) says it has equally been affected by the forex shortage problem, with its president, John Biziwick, shifting part of the blame on Reserve Bank of Malawi’s (RBM) decision to route money generated through tobacco sales through its own system, as opposed to ADBs.
Biziwick maintains that ADBs’ core line of business remains forex trading, and that the Central Bank’s decision has hurt the banking sector.
In addition to this, Bam chief executive officer, Lyness Nkungula, says failure by local companies to import materials was making it difficult for banks to operate.
“On forex shortage, I will answer this by giving an example. You have heard that companies are failing to import materials because of forex shortage. These are bank customers and they process the payment
through banks. So, if bank customers are affected; obviously the banks are, too,” says Nkungula in a written response.
Asked to comment on who was responsible for setting forex purchase limits, RBM spokesperson Ralph Tseka said on Thursday he could not immediately respond since “I am cruising, on my way to Lilongwe”. He promised to respond to questions Friday morning.
However, when called on Friday, Tseka said he was consulting and would e-mail and call later. He never did.
But one of RBM’s officials said the central bank is responsible for fixing forex purchase limits, and that ADBs take the cue from RBM.
The official added, however, that the amount of foreign currency customers could buy depended on the nature of activity the money is spent on.
He said it was not uncommon for business enterprises to negotiate and purchase more forex than RBM’s stipulated limits.
However, said the official, customers purchasing forex for personal use were not allowed to exceed their limits since the effects of their purchases on national development could not be validated.
Nevertheless, it was clear from the snap survey that ADBs have devised means of coming over the problem. Almost all the ADBs visited said they were giving their customers cash purchase passports (cards), giving them the opportunity to spend money abroad.
The ADBs credit the money to the customers’ accounts.

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