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Business decisions should decide MSB destiny

Whatever basis President Peter Mutharika used to suspend the recapitalisation process of sale of wholly State-owned Malawi Savings Bank (MSB), we dare say the decision, coming rather too late, does not help matters.

If anything, what the President’s directive has done is to spoil the soup which recently the chefs worked hard to improve the salty taste.

MSB was put up for sale earlier this year through the Public Private Partnership Commission (PPPC) which invited bids from strategic investors to buy Capital Hill stakes in MSB as well as Indebank Limited. Through the transactions, government wanted to, among other things, ensure that MSB and Indebank met new Basel II regulatory requirements in terms of capitalisation.

 

While the Indebank deal sailed through with National Bank of Malawi (NBM) as the preferred bidder, the MSB transaction, which attracted a single bid from FDH Financial Holdings Limited—owners of FDH Bank, has been marred by negative publicity and protests from some members of Parliament (MPs), civil society organisations (CSOs) and more recently some MSB staff.

Last week, a financial market analyst and the Economics Association of Malawi (Ecama) warned that such uncertainty surrounding the bank’s sale could attract a run on the institution. For its part, MSB management is on record as having said the storm is almost over following the substitution of toxic assets through promissory notes in early May.

Business decisions such as the recapitalisation of MSB are not popularity contests. Business decisions require business basis.

In its current state, what MSB requires is a clear recapitalisation plan so that it meets Basel II requirements in terms of capital adequacy, among others. That way, the regulator, the Reserve Bank of Malawi (RBM), would then treat the bank as any other bank. But with the directive, surely, RBM will have its hands tied.

Following the substitution of toxic assets, MSB had started regaining the confidence of some of its major customers and the public at large. However, the policy reversal by the President stands to further dent the image of the bank.

Banking is a highly sensitive business. Mr President, your directive will only create further uncertainty and, eventually, when time comes for the bank to be sold, it will be less attractive. We need to draw lessons from Air Malawi whose sale was marred by similar squabbles and was later given away at a time when all its aeroplanes were either grounded or impounded.

 

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