Malawi Government has appointed National Bank of Malawi (NBM) as manager for the K1.6 billion (about $4.1m) cotton fund introduced in the 2011/12 budget.
The appointment of the cotton fund manager is one way of revamping the cotton sector, according to the Cotton Development Trust (CDT).
Confirming the appointment, CDT vice-chairperson Duncan Warren said the process has taken long.
In the 2011/12 National Budget, Parliament allocated K1.6 billion to support farmers to produce high quality cotton lint for domestic use and export purposes.
The money was used to procure cotton fertiliser and seeds which were distributed to smallholder cotton farmers on loan and the money was supposed to be repaid at the time of selling their seed cotton to ginners.
In the absence of the fund manager, some farmers and institutions could not pay back loans.
Warren, however, said the delay has affected many farmers whose crop will be maturing soon.
“We are happy that finally government has identified a manager, but at the same time we are concerned that they have not yet empowered the manager to commence operations. What this means is that more money might not be recovered,” he said on the sidelines of a one-day workshop on effects of low farm gate prices of cotton organised by the Malawi Economic Justice Network (Mejn) and the Southern African Trust.
Ministry of Finance spokesperson Nations Msowoya confirmed that government settled for the bank two months ago, saying what is remaining is the addressing of some operational aspects.
But the Farmers Union of Malawi (FUM) president Felix Jumbe said the delay in appointing the manager would affect the recovery of money.
He said there is need for some legal instruments to enable the fund manager to operate successfully.
“According to my knowledge, the whole process has not been completed and we have lost time,” said Jumbe.
He said only K750 million [about $1.9m] from the fund has, so far, been recovered.
Malawi, with its economy characterised by the rising cost of living occasioned by the galloping inflation rate, high bank lending rates, wants to diversify its economy currently dependent on tobacco which brings in more than half of the country’s foreign exchange earnings.
At the time the fund was being set, 500 000 farmers were expected to get loans from the fund to be repaid after selling their crop.