Smile not at heartless thieves

President Lazarus Chakwera’s resolve for his administration to investigate some government loans acquired before he became President should not be politicized as witch-hunting. A loan is not a donation. A loan is something that is borrowed, especially a sum of money that is expected to be paid back with interest, within an agreed period of time. Those who get loans from whomsoever knowing they will never pay back are extortionists, fraudsters and thieves. And when they default repayment to government, it has the right to name, shame and prosecute them. 

There is always a risk of failing to pay back a loan. So, as a risk mitigating factor, banks demand collateral, usually pegged at between 100 and 120 percent value of the loan. This requirement makes bank loans out of reach for a majority of the unbanked Malawians whose property—usually ‘a first-user-in-Malawi’ vehicle, a motor cycle, a bicycle, a house or a piece of land in the village with no title deeds—cannot be collateralized. Banks’ high interest rates and collateral, therefore, make it extremely difficult for a majority of Malawians to access bank loans. 

It is against this pressing need to uplift the lives of its people that government set up a revolving fund offering loans on more friendly terms than those of banks. First to come on the scene was the Malawi Rural Development Fund (Mardef) and Youth Enterprise Development Fund (Yedef). In 2015, the Democratic Progressive Party (DPP) administration merged and rebranded the two to Malawi Enterprise Development Fund (Medf). Last year, the Tonse Alliance also rebranded Medf to the National Economic Empowerment Fund (Neef).

Despite being known by different names during each successive administration, the objective of the fund was and remains the same, and a noble one for that. It is to assist Malawians in the country by providing them with financial means of setting up new businesses or expanding old ones.

By January this year, Neef had only recovered a paltry K400million or 5.7 percent of the K6.8 billion—borrowed from the Export Development Fund—the organisation received when it was operating as Medf. All told, Neef inherited bad debts of K8.9 billion from Medf of which K2.2 billion was from Mardef and Yedef dating back to 2005. Neef now wants the loans written off from its books. Not because the Financial Services Act 2010 and Financial Services (Asset Classification Requirement for Microfinance Institutions) Directives, 2014, require them to do so, but because there is no trick in the book left any debt collecting firm can use to collect such money.

Regardless, Neef has rolled up its sleeves lining up a list of measures it intends to use from January 2022 to collect the K8.9billion. These include engaging guarantors—ironically political leaders who were instrumental in identifying the clients to whom the loans were issued—to help in tracking the loan beneficiaries to enforce repayments. 

Honestly, I don’t see anything on that list that can forcibly push the defaulting loan recipients to comply. A majority of the guarantors —the politicians—used the loans to earn them votes, and some to appease constituents who helped them in their quest for a political office. The bad loans date back to 2005 which means most of these politicians are now in opposition. If I may ask: when did Malawi’s ruling party and the opposition start working together? Malawian politicians only work together in Parliament when they are in cahoots to fleece the taxpayer and arrogate to themselves largesse from Account number One.

Neef should therefore not live with the illusion Malawians are so naïve as to not know the truth.  This is that in its debt collection operation, Neef, which has been allocated K40 billion in the 2020/21 national budget, will be spending good money on bad.

But not all hope is lost on this drive. Government can recover some billions from some toxic loans. It should chase with gusto the 13 companies and individuals who accessed loans totaling K6.1 billion from the government-owned Malawi Savings Bank, before it was sold to FDH bank in 2015. In 2017, the Special Purpose Recovery Vehicle, a company government formed to recover the loans, lamented that no single company or individual had bothered to pay. Efforts to recover the loans were frustrated by endless injunctions to avoid paying loans.

Government also showed no interest to recover the loans given the fact that the defaulters were politically linked to the ruling DPP. And it followed that defaulters were not going to pay back the loans as long as DPP was in power. DPP is now well and truly out of government. Time to strike the iron. Let us not smile at thieves stealing from us.