No recovery for MSB toxic loans

Government is yet to recover the K6.1 billion (about $9.5million) it bailed out 13 individuals and private companies that failed to repay Malawi Saving Bank (MSB) loans that turned toxic, it has been established.

In April 2015, government, playing ‘Father Christmas’, issued out K6.1 billion promissory notes to enable its then wholly owned MBS knock the toxic loans off its books before the bank’s 80 percent stake was sold off to FDH Financial Holdings Limited, owners of FDH Bank.

At that time, government announced formation of a special purpose vehicle to recover the money.

But almost a year down the line, the outfit, MSB Debt Collection Company, is yet to collect a dime from the 13 individuals and companies.

MSB Debt Collection Company board is chaired by Chadwick Mphande and its members include Modecai Msisha, Khuze Kapeta, Nkondola Uka and Chifundo Asedi.

In an exclusive interview with The Nation in Blantyre on Friday, Mphande said the company had not recovered anything yet.

He pushed the delay to government bureaucracy and doubted whether the money will be recovered anytime soon because of the slow pace of the justice system in the country.

Said Mphande: “We have not recovered anything yet.”

He said the board has resolved to change the name MSB Debt Collection Company to something neutral.

MSB failed to recover K6 074 773 871.70 from 13 individuals and companies at the time government was selling off its 80 percent stake, prompting Treasury to bail out the individuals and companies to facilitate the smooth process of selling the bank.

Major defaulters on the list of the toxic loans, which government has taken over, was the Mulli Brothers Limited (MBL) Holdings loan which stands at K4 969 043 316.93 (about $7.8million).

Other defaulters included Varibo Spirits owned by Duncan Kaonga at K397 763 522.07 (about $624,433), KJ Transways owned by a Mr Mkumba with a K172 536 106.23(about $270 857) loan that has not been serviced, Ganizani Transport owned by Charles Fungula owes the bank K97 908 785.35 (about $153 703).

The bank was also failing to collect K83 960 954.29 from Maranatha Institute of Education owned by Ernest Kaonga, K71 220 602.47 from Consolidated Building Contractors owned by Peter Mhone, K69 776 370.81 from CK Construction of Chester Makuwira.

Further, the bank is also yet to collect K68 034 537.28 from Fincoop, K65 910 536.30 from a firm owned by Bintony Kutsaira, K30 717 180.76 from MGI Trading of Macpharen Mpeta Phiri, K27 179 448.51 from Injena Petroleum Limited, K20 722 510.70 from Angel Wings owned by Angel Chaponda Nazombe and K12 782 074.13 from Eranive Trading of Fanny Joshua.

Treasury spokesperson Nations Msowoya, in an interview at the time the promissory notes were issued, said government took over the MSB toxic loans because the bank failed to recover the debts for a long time, adding that the decision was to deal with the toxic loans pragmatically as government will collect the money through a debt collection firm.

But Mphande said government took three months to register the debt collection firm as a company and also another three months to provide the directors with loans documentations.

He said: “We were appointed somewhere between May and July the company was registered in August. It took three months for the company to receive relevant documents, we received all the documents in December 2015.”

Mphande said the directors, then, started analysing the documents which included loan and security agreements as well as letter of appointments for the lawyers that were that were in court.

He said his board has been analysing the files to see if they have a case against the defaulters and now they are satisfied that they will take another step.

“We had to study and analyse the documents so that we should be clear in our minds how we stand on these loans. We wanted to be more careful on the documents because we are trying to avoid injunctions once we start. We have done that and we will be meeting soon to determine which case to start with,” he said.

Mphande blamed government bureaucracy on the slow pace to start the company, saying it took a long time for government to register the company.

He also said the company faces challenges with the slow pace the courts handle matters in the country.

Last year, Consumers Association of Malawi (Cama) executive director John Kapito said there was no justification to punish the poor for loans that were borrowed by individuals whose businesses are still running.

“Why was government ready to absorb loans of individual companies still running in Malawi? This is very strange. This is pure stealing from the poor and should never be allowed in a poor economy like Malawi,” he said.

Government sold off its 80 percent shared in MSB because the bank was struggling to raise K23.7 billion (about $37.2million) to meet Reserve Bank of Malawi (RBM) Basel II capitalisation requirement.