Proceed with Malawi Savings Bank sale, Bam tells government
The Bankers Association of Malawi (Bam) has advised government to proceed with the disposal of Malawi Savings Bank (MSB) in the manner proposed by the Public Private Partnership Commission (PPPC) because the current state of the bank makes it a huge fiscal risk and is not in interest of the public.
In a paper from Bam president Misheck Esau and presented by the association’s executive director Lyness Nkungula during the public debate on the sale of MSB in Lilongwe, Bam says the transaction needs to be concluded with speed to avoid threats to financial sector stability.
“Bam maintains that the business of government is not to do business that the private sector can do but rather to create a conducive environment in which the private sector can do business,” reads the paper, in part.
Bam says it views the disposal process as adequately open and transparent although the process has taken too long considering the nature of the entity being disposed of.
Bam says it does not have any doubt that the FDH Financial Holdings Limited – the prospective buyer of MSB, has the capacity to acquire and professionally manage MSB.
“Bam believes that a more successful MSB will emerge as it integrates with a retail banking group that has demonstrated capacity in this area,” says Bam, in the paper.
Bam, reads the paper, believes that the recapitalisation or divesture of government interest of MSB is the way to go.
Expected benefits, says Bam, includes increased professional management of the bank in the public interest.
“In its current state of shareholding, MSB is a huge fiscal risk and therefore not in the public interest,” says Bam.
It says there will also be an improved performance if the bank is managed by a private investor, which will result in the bank competing within the market.
Bam says previous privatisation of banks in which government used to own a substantial stakes were successful and have led to the growth and expansion of the banks which are now all strong and vibrant and these include National Bank of Malawi, Standard Bank, Nedbank and NBS Bank.
On the contrary, Bam says financial entities that continued to operate under 100 percent government ownership have either collapsed or are reported to be struggling to be on their two feet.
On MSB, Bam says the government itself has admitted that the operation of the bank has been under undue influence to the extent that the professionalism with which the bank was managed was compromised.
This, it says, means that the playing field was not level and that the regulator could have problems dealing with similar issues in the market should they happen in a private bank.
On the collection of toxic assets, Bam says the recovery process should be championed by people that have not been involved in the recapitalisation of the bank and generally the running of other banks in Malawi.