From what has transpired so far, some procedures were flouted when MRA borrowed money from five commercial banks.
First, we learnt from Finance Minister Dr Ken Lipenga that he was not aware that MRA, which falls under his ministry, borrowed money last December as Balaka South Member of Parliament George Nnensa told the National Assembly in February this year. Two days later, MRA board chairperson Dr Charles Mataya came with yet another revelation: the board was not consulted. Mataya has since resigned from the post.
Come to think of it, K30 billion is no small money in any currency. For commercial banks which not long ago agreed to ban third party cheque encashment because they were collectively losing about K100 million (about $400 000) a year to cheque fraud, it is hypocritical that they could lend out such a colossal sum just like that.
I believe the banks took a huge risk in lending money to a government agency without a transparently declared backing of central government in form of a guarantee. What if MRA defaulted and central government, as a guarantor, refused to pay? In terms of corporate governance, I understand corporate citizens such as MRA, when submitting loan applications, are expected to include board minutes or resolutions backing the application. Were board resolutions part of the application? From Matayaâ€™s explanation, I do not think so!
High-profile collapses of large corporations such as Enron and MCI Inc. in the United States in early 2000s were a result of such “fraud” and cook up of accounts as MRA did.
To avoid a repeat of the corporate scandals and restore public confidence in businesses, there has been renewed interest in corporate governance which is defined as “a set of processes, customs, policies, laws and institutions affecting the way a corporation [or company] is directed, administered or controlled.” Corporate governance also includes the relationships among the many stakeholders involved and the goals for which the corporation is governed.
No bank lends out its own money. Banks keep depositorsâ€™ money which they lend out to borrowers. Now, as a service provider to the nation, including government, I expect our banking sector to exercise some level of responsibility governed by principles of transparency and accountability in which processes and procedures are strictly followed. But the handling of the MRA case leaves one wondering whether the banking sector was under undue influence from the powers that be or indeed were simply motivated by the immoral opportunity to make quick money.
While MRA played a part in the mess, I believe the banks do not have clean hands either! Our banking sector may be solid and robust, but, I dare say, the MRA scam has left a lot to be desired. For a moment, the economy lived dangerously and we risked waking up one morning to a collapsed banking sector.