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Government fails to recover Malawi Savings Bank loans

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Government through the Malawi Savings Bank (MSB) debt collection company is failing to recover its K6.1 billion due to court injunctions that were obtained against it on the matter.

Before government sold 80 percent of its wholly owned MSB to FDH Holdings, it issued promissory notes of K6.1 billion to enable the bank to knock the toxic loans off its books, prior to the deal.

This meant that government used taxpayers’ money to pay debts for the individuals and companies who defaulted repaying their loans to MSB.

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Government anticipated to recover the loans through the debt collection special vehicle, (MSB debt Collection Company) which was established in 2015. Meanwhile, the uncollected amount has stopped accruing interest.

Media reports indicate that the (MSB) toxic assets list include Mulli Brothers Limited which owes MSB about K4.9 billion, Varibo Spirits K397 million, K172 million for KJ Transways, Ganizani Transport has K97 million, Maranatha Institute of Education owes K83.9 million.

The others are: Consolidated Building Contractors which has K71 million, CK Construction owes K69.8 million, Bintony Kutsaira’s firm owes K65.9 million, K30.7 million for MGI Trading, Injena Petroleum Limited owes K27 million, Angel wings owes K20.7 million and Eranive Trading owes K12.7 million.

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We can reveal that the debt collection company is now rocked with frustrations as they cannot collect anything from the debtors because of the court injunctions.

Chairperson for the company, Chadwick Mphande, confirmed this development, saying: “I do feel frustrated that we haven’t made much progress as we thought we would. It’s not just me, but the whole board feels that way… We can talk to the Judiciary to say we have got lots of cases about injunction after injunction but that’s the law. We can’t question the judge(s) why they are giving injunctions if they are satisfied with the grounds.”

He also disclosed that at one point, the court made a decision but before the court’s decision was implemented, the debtors obtained another injunction.

“Court injunctions, I don’t know if you are aware, are very common these days and when you get into a court injunction mode, it can take a long time,” he said.

Mphande disclosed that the same injunctions frustrated the lawyers who were initially appointed to recover the money on behalf of MSB before the establishment of MSB Debt Collection Company.

“But due to the difficulties in vacating the injunctions, the lawyers decided, now that there was a switch from MSB to the Board, that they wouldn’t pursue the issue anymore. They submitted the files to Treasury which submitted the files to us to continue [chasing for the money],” he said.

Mphande added: “I think we are doing the best within the law. If you say would you like the law changed? I would say yes because we can’t have an injunction in Blantyre, in Lilongwe on the same case but that’s the way the law is… It would have been much easier if once an injunction has been vacated you don’t go to another one.”

But Judiciary Spokesperson, Mlenga Mvula, said injunctions are just a relief which people obtain in order to avoid an infringement of a certain right.

“We wouldn’t say there are too many injunctions because getting an injunction is a constitutional right. It is not meant to be abused but protect the infringement of human rights. Bear in mind that courts get so many injunction applications and not all of them are granted,” he said.

The MSB Debt Collection Company board reports to government through the representatives of the two shareholders (Secretary to the Treasury and Solicitor General).

“I feel government would want this money recovered. They haven’t come out and said stop doing this. They have actually said, go as far as you can and let us know when you need help. As of now we haven’t yet felt the gap to need government’s assistance.

“What this means is that it is going to take us a little while [to recover the outstanding loans]. We have got to have these issues put through the courts where necessary. Getting injunctions is very easy but vacating them is a big issue,” he said.

The Daily Times has learnt that government gave the Board K20 million for its operations but the Board has not used any of that money, a thing which Mphande says is their decision to first recover the money they were assigned to recoup.

Besides Mphande, the Board comprises renowned lawyers, Mordecai Msisha and Khuze Kapeta, chartered accountant Nkondola Uka and Chifundo Asedi.

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