SHOCKER! NEEF Records K1.4 Billion Loss as Loan Collection Rate Falls to 52 Percent

Malawi’s flagship empowerment lender, the National Economic Empowerment Fund (Neef), has recorded a K1.4 billion loss halfway through the current financial year, raising serious concern about the financial health of the institution that was created to empower poor and struggling entrepreneurs.

Figures contained in the 2026 Annual Economic Report reveal a worrying decline in the fund’s ability to recover loans. The report shows that loan collection rates have dropped sharply to 52 percent, far below the 85 percent target and significantly down from 68.9 percent recorded as of September 2025.

For a lending institution that relies heavily on loan repayments to sustain operations and extend credit to others, the drop in recoveries is alarming.

The loss is also not an isolated incident. Analysis of the institution’s audited accounts shows that this is the third time in five years that the empowerment fund has posted losses, highlighting persistent financial instability.

In 2022, the fund recorded a staggering after-tax loss of K13.5 billion, followed by another K4.9 billion loss in 2023. Although the institution briefly recovered by posting profits of K814 million in 2024 and K407 million in the subsequent fiscal year, the fresh K1.4 billion loss midway through the current financial year suggests that the underlying problems remain unresolved.

Despite the losses, the institution has expanded its lending operations significantly. Its gross loan portfolio has reached K30.62 billion, exceeding the budgeted K23.08 billion by 33 percent.

According to the report, interest income has also increased sharply, rising to K21.93 billion, which is 27 percent above budget and 117 percent higher than the same period last year. The growth is largely attributed to the expansion of the loan book during the previous farming season.

The fund’s net loan portfolio has also grown from K142.3 billion in March 2025 to K196 billion by September 2025, indicating a rapid increase in lending activity.

Liquidity levels appear strong on paper. The current ratio improved to 4.37:1 as of September 2025 and is projected to rise further to 5.09:1 by March 2026, largely due to government equity injections and programmes linked to irrigation initiatives under the Ministry of Agriculture.

However, the positive indicators are overshadowed by deeper concerns about governance, loan recovery systems and alleged political interference.

In 2024, it emerged that the fund had written off K11.3 billion in loans issued between 2005 and 2018 after borrowers failed to repay.

Even more alarming, a 2020 audit by the Central Internal Audit Unit found that individuals allegedly defrauded the institution of K53.2 billion through loan disbursements made to questionable beneficiaries.

Executive Director of the Centre for Social Accountability and Transparency, Willy Kambwandira, said the losses are not surprising given longstanding concerns about governance and political influence.

“When a public empowerment fund repeatedly posts losses while reports persist about politically connected individuals accessing loans and failing to repay them, it signals institutional capture and a breakdown in accountability,” he said.

“This is no longer just a performance fluctuation. It is a systemic governance failure that risks turning the institution into a fiscal burden on taxpayers rather than a vehicle for genuine economic empowerment.”

Governance commentator Undule Mwakasungula also expressed concern, warning that persistent losses threaten the institution’s ability to serve the vulnerable groups it was designed to support.

The fund was created to provide loans to youth, women, rural entrepreneurs and small businesses that struggle to access financing from commercial banks.

“If the institution is making losses of this magnitude, it means its ability to continue supporting vulnerable and deserving Malawians is at risk,” Mwakasungula said.

He also pointed to growing allegations that politically connected individuals have benefited from loans meant for disadvantaged citizens.

A fortnight ago, the Parliamentary Committee on Commissions and Statutory Corporations reported systemic political abuse and financial mismanagement, claiming that loans intended for underprivileged Malawians had instead benefited politicians and individuals with connections.

Mwakasungula said such an anomaly must be urgently corrected.

“Persistent losses may also point to weak credit assessment systems, poor loan recovery mechanisms, political interference and lack of strong oversight,” he said, adding that the institution requires an independent audit and a transparent operational review.

Spokesperson for the fund Elizabeth Hara said she would respond to questions on the matter, but follow-ups did not yield a response.

Established in January 2005 through a presidential decree, the institution was initially known as the Malawi Rural Development Fund before later becoming the Malawi Enterprise Development Fund and eventually being renamed the National Economic Empowerment Fund in 2020.

In February 2026, its board approved another rebranding, reverting the institution back to the Malawi Enterprise Development Fund (Medf).

Despite the financial challenges, the institution has expanded access to credit significantly. Records show that 377,460 Malawians had obtained loans from the fund by December 2025, compared to 98,417 borrowers recorded in the 2021/22 financial year.

However, with losses mounting and loan recovery rates deteriorating, experts warn that the sustainability of the empowerment fund is now under serious scrutiny.

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