Economic experts have warned that despite the positive trajectory in loan recovery of 74 percent from 40 to 50 percent five years ago, the National Economic Empowerment Fund (Neef) is straddling on a risky terrain.
They advised the fund should strive for a higher recovery rate and break away from its beneficiaries’ toxic legacy of taking loans as grants or government hand-outs.
In separate interviews three analysts argued that the 74 percent recovery rate is insufficient for the fund to become self-sustaining. They have also proposed wide-ranging reforms in the entity’s ownership and operational structure to improve its governance framework.
According to Neef chief executive officer Humphrey Mdyetseni, before the rebranding of the fund, previously known as Malawi Enterprise Development Fund (Medef ), repayment hovered between 46 and 50 percent.
“This improvement [to 74 percent] signals a significant upward trajectory that indicates better loan management and borrower engagement,” he said.
He said during the first phase, after rebranding—between 2020 and 2024—the fund disbursed over K120 billion to 175 000 Malawians across diverse sectors, including agriculture, trade and, manufacturing.
During this phase, Neef registered a repayment rate of around 80 percent. This, he said, reflects a relatively high level of borrower commitment and effective loan recovery mechanisms. During this period, K20 billion was not repaid.
The fund, with a total budget of K350 billion for a five-year cycle up to this year, was launched by President Lazarus Chakwera in July last year.
By September last year, the entity had disbursed K132.7 billion in loans benefitting over 182 000 people across the country, according to Mdyetseni.
As of March this year, Neef had disbursed K243.7 billion, targeting small-scale entrepreneurs, farmers, youth and women who often find themselves excluded from conventional banking systems and other money-lending institutions.
Mdyetseni said the sizeable financial injection underscores government’s commitment to empowering the grassroots economy. He projected the fund, which aims to further extend credit facilities to small entrepreneurs, youth and women, had made a profit of around K9.3 billion by July last year.
In a brief response, Reserve Bank of Malawi spokesperson
Boston Maliketi Banda said although the required repayment rate is 100 percent, with Malawi’s business environment, 95 percent is viewed as ideal.
On his part, investment analyst Brian Kampanje said in an interview that educating borrowers on the commercial nature of the loans and the importance of timely repayment could improve recovery rates.
He said: “The fund’s model could be improved by aligning loan disbursement with the
supply side of the economy, ensuring that borrowers have reputable off-takers and established markets for their products or services.
“Such measures would help borrowers anticipate their profits accurately, including all finance charges and interest, fostering a culture of repayment and financial discipline.”
He also recommended establishment of a dedicated subsidiary focusing on agricultural inputs such as fertilisers, which are often vulnerable to natural calamities such as droughts, cyclones, or pest infestations.
Currently, Neef ’s shareholding structure includes the Ministry of Finance, the Ministry of Agriculture, the Ministry of Youth and the Ministry of Trade, each holding a 25 percent stake. But Kampanje argued that this fragmented ownership dilutes accountability and hampers decision-making.
He proposed that the Secretary to the Treasury should be made the sole shareholder, aligning the fund’s governance with the Public Finance Management Act of 2022.
Kampanje further said the fund should be reincorporated as a State-owned enterprise, which would grant it operational independence while
maintaining government oversight.
While acknowledging that the fund has made strides in reducing bureaucratic delays and other issues, Malawian Scotland-based economist Velli Nyirongo said the journey toward a sustainable, impactful and professionally-managed Neef programme requires continuous reforms, strategic partnerships and a firm commitment to good governance.
Nyirongo, who is Centre for Green Economy global lead, emphasised that strengthening the operational framework, particularly in enforcing stricter recovery measures and fostering a culture of repayment, is crucial.
He said: “The broader implication of these developments is that Neef’s loan programme is a vital component of Malawi’s strategy to reduce poverty, create jobs and promote inclusive economic growth. The fund’s targeted approach aligns with the government’s vision of empowering small-scale entrepreneurs and vulnerable groups who are often excluded from traditional finance channels.
“Nonetheless, for the programme to realise its full potential, it must evolve into a model that operates primarily on commercial principles.”
Kampanje and Nyirongo acknowledge the vital role Neef plays in Malawi’s economy, specifically by materialising the ‘Decent Work and Economic Growth’ pillar (SDG 8) which is achieved through initiatives that promote inclusive and sustainable economic growth, employment, especially in reaching marginalised groups that are often bypassed by commercial banks.
