Dissecting economic leverage that justifies Mutharika’s stand on Malawi Savings Bank

The suspension of the recapitalisation process of the Malawi Savings Bank (MSB) by government comes at the right time in view of how divisive the issue has been for past few months.

Petitioners march towards Parliament  and gives 60-day ultimatum on MSB sale

Petitioners march towards Parliament and gives 60-day ultimatum on MSB sale

The debate, however, has been made complex due to a crosscutting barrage of ideas most of which were emotional or political rather than pragmatic.

As a way of taking charge of the affairs, the President finds it wise for the recapitalization process to be put on hold to allow even a more extensive debate that will help wipe out ignorance on those commenting without facts.

As eloquently put in the President’s statement, of all the voices that have weighed into the debate, the main players – regulators of financial services and business captains- have had their voices drowned mainly due to editorial choices by media houses to accord more coverage to the loudest noise.

The recapitalization of MSB has never been a political let alone a DPP issue ever since. This process started way back in 2013 when Reserve Bank of Malawi advised government to dispose off its stake in the bank because the institution was making losses and was not fit to stand for long.

Worse still, the bank was fast losing its validity in line with the Basel II agreement that puts a cutting line of liquidity for any financial institution to operate as a bank anywhere on the face of the globe.

This Basel II requirement alone meant that what come may, MSB has to get some things right failing which its future is totally doomed.

Going on with that premise, MSB does not need government to have any stake in it anymore because it is just a matter of days or hours before it collapses due to the nature of global financial order. The only way to save the bank from extinction is recapitalizing it through Public-Private Partnership (PPP) arrangement.

Interesting is the fact that when the issue emerged in 2013 Mutharika was also of the view that it should not be sold. However, after gathering all the facts available he realized that selling it is a better and viable option as it makes financial sense.

Another argument dominating the debate is that of promissory notes that government through the central bank offered to deal with toxic loans owed to the bank.

In relation to this issue, what many fail to appreciate is that even the offering of promissory of notes is not a guarantee for the survival of the bank itself.

President Mutharika has not been shielding anyone from repaying their loans, that is why he has ordered the creation of a “Special Purpose Vehicle” which has been charged with responsibility of recovering the money from debtors.

Government, just as taxpayers, cannot allow to lose billions just like that to people who offered the bank their own personal collateral in case of failure to repay. The bank itself, as a stand alone entity, has also motioned court proceedings in a bid to recover these loans.

These actions should inform everyone that whether the bank closes or not will not delete the huge amounts that debtors owe it. Every tambala shall be recovered and taxpayers will not stand to lose anything.

Malawians might need to be reminded that government is also shedding off its stake in Indebank, another major player on the financial market. As such this MSB saga should not be viewed as an isolated case aimed at shielding anyone whether from the DPP or not.

The recapitalization of MSB is good for the economy and falls in line with global requirements that discourages governments from doing business instead of only creating a conducive environment for such endeavours.

Having commented on the issue whether from an ignorant, emotional, political or informed point of view, everyone now has the responsibility to seek facts on the issue to make informed positions as we forge ahead as a country.

The President should be commended for taking such a stance, the onus now is on everyone to understand the economic sense in the sale of MSB.

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11 thoughts on “Dissecting economic leverage that justifies Mutharika’s stand on Malawi Savings Bank”

  1. Paul says:

    This Chakhalira boy is an idiot. The whole reason MSB must be is so we do not have politicians meddling into the banks affairs. Government can not run a bank period. The bank must be sold so it operates as a commercial entity or at least govt should be a minority share holder. I do agree MSB needs to get their money back from the defaulters. My question is why has the bank failed to do that. Why ddnt the bank pounce on defaulters the time PP was in power. The issue of the bank must be closed, dispose of MSB

  2. kenkkk says:

    Chance, there is nothing knew that you are telling us. All that had already been covered before and you are heaping us with all your ignorant glory.

    This is not the right time to sell msb because the sale is being instigated for personal and political reasons. There are no convincing economic reasons for the sale now.

  3. Obvious Phiri says:

    Convinced? Far from it. If anything you’ve made even more aware of the stink that surrounds the planned sale.

    Yes, MSB needs to be sold. But giving it away to someone from the President’s tribe after it’s been shorn of the toxic debts that were forcibly obtained by party cronies and tribesmen is immoral.

    Once the government gives out the promissory notes, that will be the end of it. The government doesn’t have a good record where debt collection is concerned, no matter what entity is formed for the purpose. If anything, the planned entity will just be another vehicle to siphon off government money into the already overstuffed pockets of cronies and tribesmen.

  4. Balamanthu says:

    This spin doctor wants to back the ruler of new democracy in Malawi by the name of APM.APM as we all know runs “government of some people, for some people and for some people”.In the initial quest to sale, he was just trying to put into practice what he believes in.He was doing it for the benefit of some people.However, so much pressure was put on him such that he has employed spin doctors like chingwalungwalu ,viola and many more that are going to back him since they benefit from his new definition of democracy.

    MSB is capable of surviving if the debts are collected, good corporate governance practised, treasury stops sending officials that come to attend 10 Board meetings in a day and run off to maximize allowances.As such, when key issues are being discussed by the Board, they will be off to Admarc and will not participate.

  5. mariana says:

    A Chakhalira mukutsitsa mfundo! Bvuto lathu ife a Malawi ndi lack of patriotism, we have no sense of pride for our nation! What we care about is our individuality! Thus why people never get together to oppose real issues done by politicians.

  6. Vin mongu says:

    chakhalira has just said it plainly no need to interpret and the solution is what puludzu has said. all defaulters pay back and sell their assets. MCP & PP be clever, the bank will be sold off once parliament rises so chankwantha be ready with injunction. but mullishould payback.

  7. mulopwana says:

    KUNAMIZA ANA KUMENEKO.

  8. puludzu says:

    First of all it is important to understand why MSB is making losses when the other banks even smaller ones are posting huge annual profits in billions. MSB is surely not a loss making entity. You can’t deny the fact that this issue is all political. You can’t run away from the fact that there is a sinister motive in the hatched sale of MSB. All the purported non compliance of Basel II requirements and the talk of losses serve more to justify this ill conceived idea than telling us the real motives behind the sale. Declare those failing to repay loans bankrupt and recapitalise through putting shares on the stock market. I am made to believe that the author of this article has the intent of a spin doctor than objective.

  9. chakhalira says:

    You people are talking too much for the President. You are bringing in a lot of unnecessary issues. You talk of MSB, Air Malawi, Inde Bank & RBM…… What for?

    All this you have brought in is your shallow politics that will not help Malawians. Malawians know very well, much better how to handle this problem. They have told you what to do.

    First let all those defaulters pay the Loans they took. Period!!!.

    If I may ask, why are you talking of Reserve Bank here? Where were they when these defaulters were NOT repaying there Loans? Do you want to tell us that the Whole Reserve Bank, the regulators of the Liquidity of the Banks did not know this? Are they not just as corrupt or political as you are? Where was the Bank Supervision Team / Economic Services Team?

    Quickly to educate you on Air Malawi that you are ignorantly talking about, in case you are a stranger just as the President is: After it made terrible loses there was a time when the Chairman was the Ex – Governor of the Reserve Bank during Bakilis’ time. He changed the whole operations of Air Malawi and Bakili wanted him to go for the second term when he told him that he can not continue because of the childish way of how the Management was mismanaging Air Malawis affairs. There were too many staff tickets going on holiday abroad. When he was there he told them he can NOT take that. A Ndale anzanu omwewo started makani achabe chabe about his style of Administation, Then he told Bakili enough is enough. So he left. Ask Bakili of this Man with such unique seriousness. What I am saying is that we have very capable Men and Women in Malawi who can bring Back Malawi Savings Bank in high flying colors. We know them.

    Just take off your dirty political hands. We know you want to deliberately delay the defaulters to repay the Loans. Inuyo chosani manja anu. Ask us we will give you the people.

    Remember, Your President is a Stranger in Malawi. Ndi Mtchona!!!!

  10. Chendawaka says:

    We all get it. The problem is that the people involved are Mathanyula’s cronies. It is very murky because the people who owe the bank toxic loans are very close to Mathanyula’s family and although with all good intentions the sale of MSB in the public eye looks like he wants to save the Mullis etc. etc. That’s the problem Mathanyula has to deal with. He has a serious PR problem on his plate.

  11. Achawa Business Consultancy says:

    The suspension of the sale is a welcome development but the Bank need to be sold so that the present trend of doing business is not repeated.There are really issues which needs to be looked into before the sale for instance all toxic loans need to be repayed before the sale since the public felt cheated with the manner in which the toxic loans was being handled also there is need to have all proper procedures followed inorder for the bank to recapalise at the sametime there is need for revaluation of all the bank assets inorder to ascertain the true fair value of the institution as a whole there is also need for massive awareness on the pros and cons of the sale and no sale in a sober way so that nobody will feel betrayed

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