Fund moves to tighten controls amid probe

The National Economic Empowerment Fund (Neef), the rebranded successor of Malawi Enterprise Development Fund (Medf) Limited, says it has started implementing some internal audit controls to strengthen the system and counter abuse.

Neef board chairperson Cornelius Majawa said this in an interview on Tuesday in the face of findings by the Central Internal Audit Unit which showed serious abuse of funds, especially during the time the fund was implemented as Medf.

He said: “We are moving to ensure that the incidents do no re-occur. We are looking at internal controls, the whole lending model and see where we could tighten the process on internal controls.

“We are looking at anti-fraud strategy that includes fraud and whistle-blowing policies and the risk management framework.

“We are also looking at the products themselves that they should have inherent controls that we really know the people who are coming to borrow and now to defraud us.”

Majawa said Neef was cooperating with all institutions that are investigating the fund, including the Anti-Corruption Bureau (ACB), the Office of the Ombudsman and Malawi Police Service Fiscal Department.

The audit report recommended special investigation into the role and motive of officers who allegedly facilitated multiple loan disbursements, details of how funds were being abused without regard to any proper finance management procedures.

Reads the report in part: “A total of K45 335 000 was disbursed to beneficiaries. More than once, that resulted in over-disbursement of K22 875 000 of which only K3 515 000 was refunded.

“A total of K64 335 000 was disbursed to beneficiaries that could not be traced by the audit team together with officers at Medf branches.

“A total of K7 490 000 was disbursed to groups, but was used by individuals for personal activities without the knowledge of the intended groups because the money was deposited in the individuals’ bank accounts instead of the groups’ bank accounts.”

The report also indicates that K450 million was misallocated from the bank account of Women and Youth loan to bank account for Government Payroll Loan while K2.5 million was disbursed to groups, but was taken by people who claimed to be intermediaries between Medf and the intended beneficiaries.

Following the audit report, Youth Decide Campaign has petitioned the ACB to investigate the alleged abuse of K543 million at Medf.

In its letter to ACB dated November 20 2020, Youth Decide Campaign, led by its team leader Charles Kajoloweka expressed concern over allegations of systematic plunder of the loan.

It said youths were devastated by the findings of the audit and were convinced that Neef was “a crime scene” requiring serious attention.

The Centre for Social Accountability and Transparency has also written the Neef board to commence disciplinary and criminal prosecution of all officers suspected to have been involved in the plunder as stated by the report.

Centre for Social Accountability and Transparency executive director Willy Kambwandira has since challenged Majawa and his board to show Malawians that the institution has new people who care about accountability and financial prudence.

ACB deputy director general Eliah Emmanuel Bodole, who received the Youth Decide Campaign petition, said the bureau will investigate the matter to establish the truth.

Medf Limited, Neef’s predecessor, was registered under the company’s Act as a Company in 2014. It succeeded Malawi Rural Enterprise Development Fund [Mardef] established by the government with the approval of Parliament to disburse revolving loans to groups.

However, like its predecessor revolving funds, the fund faced a high rate of default as most beneficiaries were politically-linked; hence, felt the money was free. In some cases, because of the politicisation, unqualifying beneficiaries received loans, but never undertook viable businesses.