Little hope for K6.1bn MSB toxic loans recovery

Two years after government set up a special recovery vehicle for K6.1 billion Malawi Savings Bank (MSB) toxic loans, no single tambala has been recovered and only hope remains for the initiative to succeed.

Even the board of the special collection vehicle, MSB Debt Collection Company, comprising Chadwick Mphande as chairperson, lawyers Modecai Msisha and Khuze Kapeta, chartered accountant Nkondola Uka and Chifundo Asedi, now feels frustrated that two years have elapsed without collecting anything due to ‘complicated’ legal battles surrounding the MSB toxic loans.

MSB, a government wholly-owned commercial bank, was sold off in July 2015 to FDH Financial Holdings Limited after it failed to meet Basel II capital adequacy requirements as set by the regulator, the Reserve Bank of Malawi (RBM).

At the time of MSB’s disposal, some individuals and companies owed the bank about K6.1 billion which government offset through RBM promissory notes. Treasury hoped to recover the money through a specially set-up MSB Debt Collection Company.

In an interview on Tuesday this week, Mphande, while expressing hope of recovery, painted a blurred picture on how soon the money would be recovered, saying it might take ‘some time’ before the company makes any progress in recovering the money.

But he repeatedly tossed the blame to the country’s legal system which he said was frustrating, not only to the collection company but to many institutions trying to recover money.

Mphande said only Fincoop managed to pay back about K24.4 million few weeks before MSB was sold off while about seven companies—with significant amounts—resorted to court processes which are delaying the whole recovery process.

He said: “As a board, we feel frustrated that we have not made as much progress as thought we would. I do not think the money will be recovered soon.

“You cannot understand the court process sometimes. You will find cases where one company will take an injunction in Blantyre, when we vacate it, the same company will take another injunction in Zomba. Again, when we vacate that injunction, the company will go to Lilongwe to take another injunction on the same matter.”

Mphande explained that when they were taking over the loan collection exercise, MSB had already engaged several lawyers to help them collect the money from the ‘defaulters’ who later handed over the case files to the government established special vehicle.

“We have been discussing with some of the lawyers to proceed with the cases under new terms as well as engaging new lawyers in some circumstances. MSB had engaged the lawyers at 15 percent of the sum owed, not recovered and we thought we should negotiate this,” he said.

On government commitment, Mphande said government allocated the company K20 million for its operations. However, he said the board has not used the money because there has been no porogress in the recovery.

Secretary to the Treasury Ben Botolo said his ministry was aware that the board set to collect the money has not collected a single tambala.

Botolo said so far the ministry was not satisfied with the progress; hence they will call for a discussion with the Board of MSB Debt Collecting Company to map out the way forward.

But Patricia Mwase managing director of Credit Data, said while it was possible to recover the said money, sending debt collectors after the defaulters would be a long and winding process.

She said government should report the defaulters to Credit Reference Bureau.

Major on the list of the toxic loans inherited by government is Mulli Brothers Limited (MBL) Holdings with K4.9 billion. The others are Varibo Spirits owned by Duncan Kaonga at K397 million, KJ Transways owned by a Mr Mkumba with a K172 million loan that has not been serviced, Ganizani Transport owned by Charles Fungula owes the bank K97 million.

The bank was also failing to collect K83.9 million from Maranatha Institute of Education owned by Ernest Kaonga, K71 million from Consolidated Building Contractors owned by Peter Mhone, K69.8 million  from CK Construction of Chester Makuwira, K65.9 million  from a firm  owned by Bintony Kutsaira, K30.7 million from MGI Trading of Macpharen Mpeta Phiri, K27 million of Injena Petroleum Limited, K20.7 million of Angel Wings owned by Angel Chaponda Nazombe and K12.7 million of Eranive Trading owned by Fanny Joshua.