Muscco in financial woes

The Malawi Union of Savings and Credit Cooperatives (Muscco) is embroiled in financial turmoil with its directors accused of contributing to the dwindling financial standing of the country’s largest cooperative movement and its savings and credit cooperatives (Saccos) losing about K230 million (about $575 000) institutional capital within a year.

Weekend Nation has learnt that directors of Saccos, including those overseeing Muscco operations have been failing to pay K55.7 million (about $140 000) of K178 million (about $445 000) the movement is owed over a long period.

According to Muscco’s 2012 financial report, the organisation was on the brink of collapse during the year and survived largely because of support from its donor partners, including the Canadian Cooperative Association, the Swedish Cooperative Centre and Hivos International.

“Perhaps on account of the same financial pressures that Muscco has been experiencing, Saccos’ failure to honour their obligations in 2012 did not help matters either,” reads the financial report in part.

The report says institutional capital for Saccos under Muscco tumbled from K121 million (about $302 500) in December 2011 to [negative] K113 million (about $283 000) by September 2012, largely due to writing off of Finance Cooperative Limited (Fincoop) bad loans.

“Muscco is owed huge amounts in obligations, especially capitalisation and premiums that would have resulted in a substantial surplus for Muscco. It was noted that a total of K54 million [about $135 000] premiums and capitalisation of K124 million [about $310 000] are outstanding as at December 31 2012. “Cumulatively, directors of Saccos owe Muscco K24.5 million [about $61 250] in capitalisation, K9.1 million [about $22 750] in insurance premiums, K17.6 million [about $44 000] in delinquent loan principal and K4.5 million [about $11 250] delinquent loan interest income.

Sadly, directors of Saccos have contributed significantly to the less than impressive financial status of the union,” adds the report.

The financial report also says the recent “intensive and extensive investigative” Sacco audit has exposed worrying trends in Sacco governance, especially in the bigger Saccos.

“Meanwhile, rampant abuse of resources by directors and managers rages on unabated,” says the report.

The Saccos which the report identifies as having “significant” operational and governance challenges include Nsanje Community, Thyolo Teachers,

Blantyre ADD, Bvumbwe, Zomba Teachers, Lilongwe ADD, Dwasco and Phindu

Saccos, saying: “These Saccos remain vulnerable and will continue to be on our watch list.”

Meanwhile, Weekend Nation has also learnt that the cooperative movement has been locked in disagreements over sale of institutional houses in Lilongwe for some development projects which have not taken off.

According to documents we have seen, Muscco sold its institutional house at Area 47 in Lilongwe at about K22 million (about $52 380) in 2011 to invest in construction of a training centre, but no progress has so far been made on the project.

Right now, Muscco is in the process of selling another institutional house at Area 12 to invest in another project of establishing a K25 million (about $62 500) forex bureau before the training centre project materialises.

At one of the union’s board meetings in April 2012, the directors asked management about proceeds of the Area 47 house, but were not given answers.

In an interview on Wednesday, Muscco chief executive officer Sylvester Kadzola said proceeds from the Area 47 house are in a fixed deposit account at the bank, saying they want to use proceeds of the two houses to invest in forex bureau business.

He said they are yet to find an “appropriate” site to construct the training centre.

“The money is invested so that we can make more money on it. It’s in a fixed instrument with one of the financial institutions. The issue of disposing off the [Area 47] house was approved by the board. The Area 12 house has not been sold yet.

“If the majority of board members favour that decision, it will be taken and become a board decision,” said Kadzola.

He said all directors have been ordered to settle their loans by end of June, adding they are also currently ploughing back into Saccos all surpluses which some Saccos are making to raise the cooperatives’ institutional capital.

Muscco chairperson Faith Mang’anda said in an interview on Thursday the board has already taken action on debts Muscco is owed by ordering that all directors repay their loans by June before they go to their annual general meeting (AGM).

“Those who will not pay the money before the AGM will not be eligible to stand in positions,” said Mang’anda.