From the archives: Disposing stake in MSB

Following recent developments about the Malawi Government’s moves to dilute its shareholding in three financial institutions—Indebank Limited, Pride Malawi and Malawi Savings Bank (MSB), I hereby reproduce the following article published on September 5 2013 with special focus on MSB.

Why MSB needs new investors

Watching from the sidelines, I have always seen Malawi Savings Bank (MSB), the commercial bank 100 percent owned by government, as one example of public enterprises with potential to grow and perform better if they were run as businesses.

Sadly, however, that has not been the case for quite some time now. MSB has often limped in a market where similar institutions are making ‘astronomical’ profits and giving their shareholders their money’s worth.

Why has MSB failed to shine where others, including the smallest of players in the financial sector, have minted gold year-in and year-out? My take is that the present ownership structure of MSB, where government is the sole shareholder, is the major bottleneck stifling MSB from realising its full potential and give its shareholders value for their investment.

There is too much political interference, including in the appointment of the bank’s chief executive officer (CEO) and the board of directors where the President has a hand. This alone does not help matters.

Due to its government ownership, MSB is (and has always been) prone to abuse, especially by politicians in power and their associates. If the problem is not checked, by way of government diluting its shareholding to bring on board new investors, we will all be losers after the bank folds because some politicians and their associates have abused the system.

When I watch, from the sidelines, the goings-on at MSB, I always recall how, not so long ago, the same species of Malawians called politicians brought down what used to be government’s investment and development arm, the Malawi Development Corporation (MDC).

Today, MSB lawyers are spending more time in court fighting with borrowers who have either failed to repay loans or are refusing altogether to repay due to some loopholes in the bank’s system. It is also public knowledge that most of the borrowers got loans because of their political linkages and not ability to repay based on the loan check-list.

It is also not clear how MSB has managed some of the initiatives or projects government assigned it such as the Public Universities Student Loan Scheme and the Youth Enterprise Development Fund (Yedef).

In my previous articles on MSB, I expressed reservations about making the office of the Secretary to the Treasury (ST) as chairperson of the MSB board of directors. For the record, after several calls, including one from Business Unpacked, government appointed former Reserve Bank of Malawi governor Victor Mbewe as MSB board chairperson last year. At least he is not the ST.

I further argued that if MSB became a publicly-listed company, it had the potential to grow and deliver a diversified range of products and indeed make more profits and pay dividends to the shareholders.

It was also refreshing to hear come-back MSB CEO Ian Bonongwe emphasising the need for government to dilute its shareholding in the bank. His call is not necessarily new as the bank’s board of directors, about two years ago, approved a proposal for the bank to list on the local stock exchange.

Bonongwe has since restructured the bank’s top management in a major shakeup that has seen some departments abolished all in a bid to turnaround fortunes after poor performance.

It will not be strange for government to hold few shares in MSB. Currently, Capital Hill owns a 41.38 percent stake in Indebank Limited where Admarc Investments Holdings Limited has 25.67 percent, Press Trust 30 percent and Indebank employees own a 2.95 percent stake.

Generally, governments are “poor entrepreneurs”, hence, in an ideal situation, governments should have no business running businesses.

So, MSB, which was transformed from what used to be the Post Office Savings Bank (POSB), should be allowed to run like a business. The bank has some of the brilliant brains in its management and ranks whom, given a conducive environment to implement their ideas, can take the bank to greater heights.

Otherwise, in the current state, as a taxpayer on whose behalf Capital Hill holds the 100 percent shareholding, I feel I am getting a raw deal with the potential of my investment going down the drain.


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