MAICC born to solve Solve financing gaps

In the year just gone, the financial sector registered historical breakthrough in the birth of the Malawi Agricultural and Industrial Investment Corporation (Maiic), the first-ever public, private  partnership (PPP) development finance institution.

When Maiic was being launched in Lilongwe, President Peter Mutharika, touted the institution as a platform for facilitating investments in a wider spectrum of growth sectors, specifically in agriculture. 

During the launch, representatives of the business community warned against political manouvering and abuse of funds in Maiic, established to facilitate industrialisation.

CDH Investment Bank board chairperson Frankling Kennedy, whose institution was tasked to set up Maiic structures, expressed the fears knowing the government has a 20 percent stake and was seeking partners to take up the remaining 80 percent under PPP arrangement.

In Maiic, Malawi Government’s start-up or seed capital comprises K22 billion and another K13 billion from the proceeds of the sale of Malawi Savings Bank and Indebank.

Kennedy said the corporation will succeed if, right from the onset, it operates on strict compliance guidelines and policies key to preventing resource abuse, money laundering activities and governance on professional lines.

Among other set-up tasks after the launch, Maicc was to engage its chief executive officer (CEO) with the hope to attract several commercial banks and pension fund administrators, external financier, among others, to capitalise it.

Economics Association of Malawi (Ecama) president Chikumbutso Kalilombe welcomed Maicc, but was quick to point out that it will closely monitor how the corporation will be run.

He cautioned government to watch out and avoid killing the corporation through political factors, citing how a viable entity like the Malawi Development Corporation (MDC) collapsed.

Old Mutual Malawi plc group CEO Edith Jiya, whose institution also manages pension funds, hailed the launch of the corporation, but said her institution will first study the corporation’s business model before considering partnering with it.

Launching the corporation, Mutharika described it as a game -changer and a pathway to the country’s achievement of the industrialisation goal for socio-economic development, which is part of his government agenda.

He said: “We are empowering the Malawian farmer. This is the day we begin to industrialise Malawi in a practical sense. With this investment corporation, we are implementing our national vision to end poverty.

“We have talked about reducing poverty for too many years. Now, talk time is over.”

Commercial banks in the country have not been financing long-term investment projects, owing to risks associated with sectors such as agriculture, mining and manufacturing,  leaving farmers and  some investors destitute.

Maiic proposed shareholding structure includes 41 percent stake for  public limited companies private limited companies, banks, financial institutions and funds incorporated or registered in Malawi and a 20 percent stake for government or its agencies.

International financial institutions, corporations and investors registered outside Malawi have a 39 percent stake, individuals have a 10 percent stake and any investors will be incorporated as recommended by the board of directors, with no voting rights.

In December last year, Maiic unveiled an ambitious plan to raise $1 billion (about K750 billion) in capital in the next decade.

The institution also announced that it was now fully operationalised as the country’s vehicle for mobilising local and international financial resources to help catalyse agricultural and industrial development.

Maiic CEO Taziona Chaponda said they plan to raise the capital by using avenues such as pension funds, private equity firms, regional and international development finance institutions and other international investors.

He said: “In 2020, we will focus on the local market and our target is to raise $80 million [about K60 billion]during the year with a local focus. In the next three years, our focus will then be broader as we want to raise about $200 million [about K144 billion) during the period. So the $1 billion will be spread within a period of 10  years.”

Chaponda said unlike the banking credit which is short-term in nature, Maiic shall be offering credit facilities with loan tenors longer than the short-term horizon, which he said will also be affordable compared to the commercial market.

Reserve Bank of Malawi (RBM) Governor Dalitso Kabambe said the establishment of Maiic is timely, saying currently, Malawi has high streets banks only, which he said offer predominantly short-term loans as well as the Malawi Stock Exchange which offers equity in business opportunities.

“What we have been missing is the presence of development finance institutions, which offer medium to long-term project loans,” he said. A feasibility study commissioned by government in 2013 showed that there was a great need to establish a development financial institution in Malawi to close the huge financing gaps, particularly in the areas of infrastructure and small and medium enterprises.