Govt fertiliser loan recovery misses deadline

Recovery of the loans dispensed under the $63 million (about K25 billion) Farm Input Loan Programme (Filp), initiated by former president Joyce Banda, will miss the deadline of end this month because the initiative was politicised, Weekend Nation has learnt.

And with 11 days before deadline, only 12 percent of the money has been recovered.

Malawi Rural Development Enterprise Fund (Medf) spokesperson Isaac Mbekeani – the coordinator for the implementation of the loan scheme which used funds not approved by Parliament – admitted to Weekend Nation on Tuesday that the main challenge is that the whole programme was conceived and implemented during campaign time.

“It follows, therefore, that collections are a challenge due to promises that were made by politicians during campaign time about fertiliser loans,” said Mbekeani in a written response to our questionnaire. “Some politicians campaigned on the basis that once they get into power, these loans will be cancelled.”

“Considering the factors outlined, besides the fact that this is the first time we are doing this programme, the August (2014) deadline was too optimistic,” he added.

To salvage the situation, Mbekeani said, Medf held meetings with politicians in several areas to make them understand that the money for the loans belongs to government and needs to be recovered.

“Most of them have helped us address their constituents on the need to repay so that their subjects are able to access other loans for the coming season,” he said.

According to Mbekeani, as of August 19, 2014 – some 11 days to the deadline – only K3.2 billion had been recovered.

—First repayments—

He explained that from April 2014, which was the planned month for first repayments, “we saw very low repayments as most farmers had not finished harvesting and those who had finished were still holding on to their produce due to low prices ruling on the market.”

He added that when prices started picking up from mid-July, there was a surge in repayment figures “and at the time of writing this we are witnessing repayments averaging K60 million a day.”

“At this rate, we are very confident that we should be getting repayments of over 50 percent by mid-September 2014 and we are also optimistic that by the start of the farming season in October to November, the figure should be above 80 percent,” he said.

Besides, according to Mbekeani, other methods which have been put in place to boost repayment methods include agency banking with the Opportunity Bank of Malawi (OBM) and cluster meetings, where cash is collected using vehicles of senior managers and several officers.

Other methods are use of Airtel money platform ad collection of produce as repayment using the Agriculture Commodity Exchange and Auction Holdings Commodity Exchange warehouse receipt methodology, which offers farmers better prices than those offered by vendors.

But Treasury, expected to unveil the 2014/2015 budget next month – which, according to an October 26, 2013 interview with the Office of the President and Cabinet (OPC) spokesperson, is supposed to include the expenditure – said their budgeting is being done expecting that the money will be recovered.

—Effect on 2014/15 budget—

Treasury spokesperson, Nations Msowoya, reacting to the low recovery return in terms of how it will affect the 2014/2015 budget, said government does not expect a failed recovery exercise.

“We are aware that government will be held liable if there is a total failure to recover the money. But in as far as budgeting is concerned, at no point do we expect that Merdf will come to tell us that they have failed to recover the money,” he said.

Meanwhile, while Mbekeani said in an interview the programme will again be run this year, Msowoya insisted that Merdf would only do that on commercial basis.

President Banda first announced the loan programme – which critics later branded as parallel Farm Input Subisidy Programme (Fisp)- in Ntcheu April 2013 to help farmers not accommodated in Fisp to access farm inputs through soft loans.

Unlike Fisp in which farmers buy a 50-kg bag of fertiliser at K500, the loan scheme required farmers to form clubs and pay five percent of the total loan.

But the programme was not included in the 2013/14 national budget and many were shocked to learn in November 2013 that government had spent $63 million to buy 75 000 metric tonnes of fertiliser outside Parliament’s approved estimates for the current financial year.

In an interview with Weekend Nation at the time, OPC spokesperson Arthur Chipenda described the unusual expenditure as a “future payment” that although spent during the previous financial year, would be included in the 2014/15 budget.

But observers such as Civil Society Agriculture Network (Cicanet) executive director Tamani Nkhono-Mvula said spending public funds without Parliament approval was breaking the country’s laws.

—Transparency and accountability—

Filp’s lack of transparency and accountability also irked various stakeholders, including British High Commissioner Michael Nevin, who in January 2014 demanded that Capital Hill explains how the programme was being financed and administered.

Others, such as the Farmers Union of Malawi (FUM), worried that the lack of transparency of the initiative’s financing mechanisms, beneficiary identification, loan repayment models and a lack of stakeholders’ involvement could wreck the programme.

Those fears, according to Nation on Sunday investigations, came to pass. The paper’s edition of March 2, 2014 quoted two officials from the Ministry of Agriculture, who were part of a team investigating anomalies in the initiative, as saying the programme was riddled with bogus farmers’ clubs nationwide who were accessing fertiliser and selling it at the expense of targeted beneficiaries.

One of the investigators, according to the paper, said at the time that preliminary findings showed that most farmers whose names appeared on the list of the clubs as members did not receive the fertiliser and that they were not aware that they owed government any money.

—Middlemen—

According to the paper, this investigator said it was discovered that “vendors” were going out in communities “hiring” voter IDs at K1 000 per card from villagers and using the cards to register farmer’s clubs with the owners of the certificates as members. The cards owners, the paper wrote, had no idea what the voter IDs would be used for.

For one to be accepted as a member of a club, the paper reported, they needed to have a Malawi Electoral Commission (MEC) voter’s card, a letter carrying stamps from chiefs and pay K3 300.

Thus, according to the paper, the vendors paid K1 000 for the voter’s certificate which they photocopied and paid K1 000 to the chief for the stamp.

Another investigator, according to the same edition of Nation On Sunday, said recovering the loans would be difficult as most of the farmers recorded to have collected the fertiliser denied getting any and “clubs” could not be traced.

Blantyre Agricultural Development Division (Badd) programme manager Nelson Mataka confirmed to the paper the existence of bogus farmers’ clubs within his area

But, according to the paper, he said Medf was the appropriate institution to respond to matters surrounding Filp.

Ministry of Agriculture’s spokesperson Sarah Chowa, the paper reported, said the ministry was aware that some people were “renting” farmers’ identity cards and using them to get loans without the villagers being part of the group.