BANKS' RED-TAPE FUELS 'KATAPILA'
By Agnes Mizere - The Sunday Times Newspaper

THE Bankers Association of Malawi (Bam) has appealed to clients to be patient and plan in advance when applying for bank loans instead of relying on illegal usury businesses locally known as katapila.

Bam Executive Director Fanuel Kumdana was reacting to reports that many people flood the black market to get loans as well as buying and selling foreign currencies.

Police spokesperson for the southern region, Davie Chingwalu, however in an interview said both katapila and black market forex exchanges are offences.

While government says black market dealings in short-term loans and foreign currencies are illegal desperate people are not moved and still flock to the | black market creating a huge demand for the illegal unlicensed traders.

"During funerals, it's easier to get cash from katapila than go through bureaucracy in some banks, where collateral and other things are needed. Even when travelling outside the country, it takes time to procure hard currencies from the bank, while the same transaction lasts less than ten minutes at the black market," says Evance Fundi, a resident of Blantyre.

But Kumdana argues that there are more advantages of getting loans and forex from the banks i and other licensed institutions than from loan sharks.

He explained that banks offer long-term , partnerships unlike katapila dealers who just want to make profits or illegal forex dealers who can sell fake dollars. He advised clients to inform banks in advance ! before travelling as they deal with a lot of clients.

He said in cases like instant problems like funerals, clients with good track records can approach bank managers for assistance. "Even when you approach a bank for a loan project you enter into a partnership as a client with a business proposal. They go through it because you're entering into a long-term partnership and they want you to succeed. They don't want your business to flop," he said.

Commenting on collateral, he said banks are not just interested in selling property but it is required in case one fails to payback a loan after a given reasonable time period, unlike katapila dealers who just want your money and are not interested in your success. "Bank loans boosts businesses while katapila dealers cripple your business," he said. According to Kumdana, bank interest rates range from 17 to 22 percent unlike katapila with exorbitant interest as high as 50% and shorter pay back periods.

He also said katapila is illegal because it is not licensed and regulated and no one is protected will dealers inflicting evil on clients.

Some katapila syndicates use a team of thugs to handle defaulters and many have lost property in such cases. It is difficult for such cases to go to court.