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Government pursues Malawi Savings Bank debtors

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Williams Banda

The government has re-engaged members of the special purpose recovery vehicle (SPRV) to restart the K6.1 billion Malawi Savings Bank (MSB) loan recovery process.

The initiative targets some 12 individuals and companies that obtained loans from the bank before it was sold in 2015.

Both Treasury spokesperson Williams Banda and SPRV Chairperson Chadwick Mphande confirmed that there have been meetings between the government and the debt collectors—other members include lawyer Modecai Msisha, chartered accountant Nkondola Uka and Chifundo Asedi—but could not disclose the outcome of the discussions.

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At the time the government was selling off its 80 percent stake to FDH Holdings, some 12 individuals and companies had outstanding loans amounting to K6.1 billion, prompting the government to bail out the individuals and companies to facilitate the smooth process of selling the bank.

Banda said there have been meetings between the government and the debt collectors, but said the government would update the citizenry on progress and outcome.

“Other beneficiaries of toxic loans are paying.

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“However, the government will update the public after meeting the debt collector,” he said.

Banda said one of the companies that have been paying back the loan is Mulli Brothers— which agreed with the previous government to pay about K5 million a month— indicating that some quarters wanted to renegotiate the amount as they felt it could take years to settle the loan.

Mulli Brothers allegedly owed the bank K4.6 billion.

SPRV Chairperson Mphande declined to comment on the matter, saying he left everything in the hands of Ministry of Finance officials.

“I am still chairperson of the committee but the committee is not active at the moment. We briefed the Minister of Finance and the Secretary to the Treasury; so, you should talk to them,” he said.

In October last year, Human Rights Defenders Coalition wrote the Ministry of Finance, urging the government to move in and recover the loans.

“As you are aware, the government sold MSB to FDH Bank. When the bank was being sold, some politically connected individuals and companies owed the bank over K6 billion and that government did not recover the loans,” the letter reads.

In a telephone interview, Trapence said the issue of MSB loans involved more than just the selling of the bank, asking the Tonse Alliance-led administration to appraise Malawians on the recovery process.

“We wrote ACB and we expect them to brief the nation on the recovery progress. Otherwise, we expect the current government to also update the citizenry,” he said.

One MSB former employee told The Daily Times that the whole process of selling the bank was staged.

“There was a fake debate where the panellists were conveniently assembled. At the time of selling Malawi Saving Bank, the owners—the general public—were not fully consulted.

“Another contentious issue was the price. How can such a bank be sold at K5 billion? In 2014, the bank made a loss of about K1.9 billion; however, management accounts of May 2015 show that the loss was reversed mainly due to the conversion of the toxic assets into interest-earning assets through Promissory Notes,” the source said.

He said, in 2015, the bank had recorded a consolidated pre-tax profit of K2.5billion.

“If the bank were recapitalised, and with good management, it could have been profitable,” said the source.

He said the loans had been on MSB’s books for a very long time without generating any interest/ income for the bank, thereby reducing its share value.

“The bank has failed to recover these loans for a very long time. Therefore, continued pressure on the bank, which has already failed to recover these loans, will not help, in terms of its net worth. At the time of selling the bank, the government decided to take away the K6.1 billion loans by issuing Promissory Notes to improve the bank’s balance sheet and its liquidity position so that it could continue its normal operations.

“Secondly, the government created a Special Purpose Vehicle/ Debt Collection Unit to ensure that these loans are repaid,” said the source.

At the time the bank was being sold, Sterling Timbers allegedly owed it K1.4 billion, Varibo Spirits allegedly owed the bank K397 million while KJ Transways had borrowed K172 million from the bank.

Ganizani Transport allegedly owed the bank K97 million, Maranatha Institute of Education owed the bank K83.9 million, Consolidated Building Contractors allegedly owed MSB K71 million, CK Construction had borrowed from the bank K69.8 million while K Investment had borrowed K65.9 million.

In 2015, the government sold MSB to FDH and Inde Bank to National Bank amid protests by stakeholders, who said the move was a bad idea.

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