K8bn loan fund raises eyebrows

Political analysts have questioned the timing of the  K8 billion youth and women loan fund launched by President Peter Mutharika, branding it a ploy to woo women and youth votes in the forthcoming fresh presidential elections. 

Their reactions follow the launch of the scheme in Blantyre on Wednesday to be implemented by Malawi Enterprise Development Fund (Medf).

In his launch speech at Sunbird Mount Soche, the President said: “There are many Malawians and farmers working hard to start local industries, but they need capital. For too long, access to capital has remained the biggest challenge.

“Most of the businesses by women and youths have failed to grow because of lack of capital. Many women and youths have failed to even start a business because they have no capital.”

Reacting to the launch of the scheme highlighted in the K1.8 trillion 2019/20 National Budget passed last February, Happy Kayuni, professor in political and administrative studies at Chancellor College— a constituent college of the University of Malawi, noted that in every electoral cycle government comes up with innovative measures mainly targeting the youth, women and other vulnerable groups in the society.

He said: “This is one of those political moves which I see is targeting the youth and women votes in the coming elections.”

While observing that the loan programme indicates government’s recognition of the economic plight of the youth and women, political scientist Henry Chingaipe shared Kayuni’s sentiments that the timing is meant to appeal to the youth and women in the fresh election the Constitutional Court ordered on February 3 after nullifying the May 21 2019 presidential elections over irregularities as prayed by petitioners.

He said: “The face of poverty in this country is female and youthful and this can thus be deemed as a response to the demands that young people and women made through the women’s and youth manifesto prior to the 2019 general election.

“Coming in the wake of a fresh presidential election, this is obviously intended to appeal to youth and women as majority of registered voters for the 2019 elections were youth at 54 percent and when disaggregated by gender, there were more women registered voters than men.”

Previous funds of this nature, which are ideally conceived to provide financial muscle to individuals, have been subject to abuse, recording poor loan recoveries rates as most beneficiaries perceived the loans as grants; hence, not repaying them.

Medf, the institution entrusted with the management of the loan scheme, has since been reporting negative financial performance and in the 2018/19 financial year, the Malawi Government injected a K3.8 billion gross refund on expenses to the fund.

Similarly, the Farm Input Loan Programme (Filp) championed by former president Joyce Banda was also abused as the $63 million (about K26.4 billion) invested in buying inputs was not recovered.

Chingaipe observed that default rates for loan repayments have been high but with no investments worth writing home about beyond incubation stage.

He said: “We know from various studies on Medf, Yedef [Youth Enterprise Development Fund] and similar initiatives that such loan programmes become politically partisan, leading to award of loans to people who support ruling parties even when they have no viable business or investment ideas.

“One would, therefore, want to see or hear what is different in the design of these new loan programmes and how all the vices that are known to beset their performance will be addressed in these programmes.”

But speaking during the launch, Medf board chairperson Patrick Chilambe underscored the need for beneficiaries to pay back their loans to enable others to borrow from the revolving fund.

He said to ensure loan repayment and recovery, Medf has put emphasis on changing the culture of beneficiaries.

“For every loan that is extended to the group, efforts are taken to inculcate a saving culture to the group. It also includes some training on basic financial literacy so that they are able to maintain records of account and book keeping records,” said Chilambe.

On her part, African Women’s Entrepreneurship Programme (Awep) Malawi chapter president Grace Mijiga Mhango is keen to see the fund benefit the intended beneficiaries.

“It is pleasing to note that government has put aside this fund specifically for women and youth. It is our hope that it is women and youth who would benefit as previous records have indicated that we women have been sidelined in such kind of programmes,” she said.

Under the youth and women enterprise loans, the youth can access Maziko meant for start-ups and Katswiri for those seeking to boost their existing businesses. For women seeking start-ups, there is Chiyambi at their disposal while those already in business have Titchukume to grow their ventures.

In an interview last evening, Minister of Finance, Economic Planning and Development Joseph Mwanamvekha said the fund has a provisional standby facility of K5 billion.

He said: “Should the demand go beyond the said K8 billion, Medf shall find extra resources to the tune of K5 billion from any of the country’s commercial banks to finance the gap.”

The high-profile launch of the women and youth loan scheme comes barely one week after government announced the abolition of quota system of selecting students to public universities and other institutions of higher learning as well as reintroduction of Junior Certificate of Education (JCE) examination.

Political observers see the decisions as a populist agenda to woo votes.

In the run-up to the May 21 2019 Tripartite Elections, UTM Party led by the country’s Vice-President Saulos Chilima boldly pledged to abolish quota system. However, government then argued that there was need to increase spaces in higher education institutions to implement such a policy. Between then and now, no new university has been opened.