The Malawi Enterprise Development Fund (Medf) has recovered about K2 billion from loan defaulters after taking legal action against them, but remains with over K5 billion to be recovered.
Medf has so far engaged individuals who obtained the loans because of being politically-connected, but did not have business plans or effective methods of repaying the loans.
Medf chief operations officer Dingiswayo Jere said in an interview yesterday that using the courts, they have so far recovered about K2 billion out of the K7 billion owed to the company.
He said: “We have so far recovered about K2 billion through that exercise on loans that had overstayed. When the defaulters saw that we were serious about taking them to court, they approached us and this has yielded results so far.”
Jere said Medf has been failing to operate as a loan revolving fund due to the high default rates since its establishment in 2005.
Meanwhile, Treasury plans to recapitalise the company to enable it continue disbursing loans.
Jere said Medf is looking for “not less than” K4 billion to enable it to bounce back.
Considering that the previous loans were disbursed without structures to enable smooth recovery of the money, the Ministry of Fianance, Economic Planning and Development has insisted on certain criteria to be met before recapitalisation.
Treasury has also insisted on reconciliations of the Medf accounts before they can be eligible for recapitalisation.
“The process is ongoing and the documents have been submitted and exchanged with the Ministry of Finance,” Jere said.
The Ministry of Finance plans to spend about K100 million in the programme to recapitalise Medf, according to the 2017/18 financial statement.
Medf is the successor to Malawi Enterprise Development Fund (Madef) and Youth Enterprise Development Fund (Yedef) and Farm Input Loan Programme which were established to target non-bankable individuals who could not access bank loans without collateral.
However, the micro-finance institutions were highly abused by politically-linked individuals who obtained loans and did not repay.