Malawi: Youth, Women Facing Challenges to Access Neef Loans

"There is need to educate the youth, women who get the loan on financial prudence and discipline."

The youth and women in the country are facing insurmountable problems to access the flagship countrywide loan scheme from the the country's micro-finance firm, the National Economic Empowerment Funds (NEEF) due to cumbersome procedures.

The matter was raised through a question during a bi-weekly State House Press briefing, which was convened on Monday after State House director of Communication and President Chakwera's Executive Assistant, Sean Kampondeni announced that the Head of State had a fact-finding date with the NEEF top brass to iron things out.

Responding to question, Brian Banda, President Chakwera's Press Secretary, who was eloquent than he usually is, said the Malawian leader is still fully committed to fulfil his campaign blueprint promise to give loans to the youth and women in the country in order to help them help themselves in sustaining and improving their livelihoods.

"Time and again, President Chakwera has persistently said that he is committed to transform the lives of the youth, women and the underprivileged in the country and this is why he has had a meeting with the people responsible in disbursing the loans so as to appreciate the problems that they and the people who access the facility face.

"President Chakwera want the process of obtaining these loans to be easy and user-friendly - The president has the youth and the women at his heart and as you can see what he is doing when appointing people in positions reflects his unflinching commitment to give the youth and women a chance soar higher in various disciplines.

Banda further explained that President Chakwera might have been concerned with the slow pace on NEEF's timeline in dispensing funds to young people and women.

"The President had a meeting with the board chair of NEEF because he is concerned with the grievances by young people and women around the country that some operations of this fund and dispensation of these loans are not going according to the intended timeline," the Director stated.

'The Genesis'

The Malawi Enterprise Development Fund (MEDF) Limited was registered under the Company's Act as a Company that is limited by guarantee in 2014.

MEDF Ltd is successor of the Malawi Rural Development Enterprise Fund [MARDEF] which was established by the Government of the Republic of Malawi with the approval of Parliament.

MARDEF was launched by Presidential decree on 29th January, 2005.

Thereafter the Malawi Parliament passed a resolution to set up MARDEF on 11th April, 2005 where it was envisaged that MARDEF would eventually be established by either an Act of Parliament or under the Companies Act as a company limited by guarantee in the year 2014.

As a result of this, MEDF was formed and inherited the assets and liabilities of former MERDEF and FILP.

Malawi Enterprise Development Fund (MEDF) was then registered under Company Act 2013 as a company limited by guarantee and has a Reserve Bank of Malawi licence as a Microfinance Institution in the non-deposit taking category.

MEDF Is also governed by the Financial Services Act 2010 and Public Finance Management Act.

MEDF is 100% owned by Malawi Government through the following ministries, Ministry of Finance and Economic Planning with a stake of 25 percent, while Ministry of Agriculture, Water and Irrigation, the Ministry of Labour, Youth, Sports and Manpower Development and Ministry of Industry, Trade and Tourism all have 25 percent.

Malawi Enterprise Development Fund (MEDF) was then registered under Company Act 2013 as a company limited by guarantee and has a Reserve Bank of Malawi licence as a Microfinance Institution in the non-deposit taking category.

National Economic Empowerment Fund (Neef) has only recovered K400 million out of the K6.5 billion that was disbursed nationwide when it was operating as Malawi Enterprise Development Fund (Medf).

The amount represents 5.7 percent, which has pushed the government financial entity to set aside May and June 2021 as recovery months.

'Financial Education'

NEEF Public Relations and Marketing Officer, Whyghtone Kapasule, told Nyasa Times Monday in an interview that in order to recover the remaining chunk of money, they have also embarked on intense sensitisation campaign.

"The clients need to be informed of the need to repay the loans. On this, we have sent messages on all community radios and the national ones, informing them that Neef inherited all Medf loans and as such, Neef is responsible to collect all the loans. Secondly, we have deployed loan officers and intensified client tracing, and have involved authorities in the districts," he said.

According to Kapasule in some situations, they are issuing demand letters to clients with outstanding loans, engaging debt collectors and even opting for formal legal redress.

The K6.8 billion was borrowed from Export Development Fund.

He could neither confirm nor deny that a former cabinet minister under the previous regime was among those failing to service their loans with NEEF.

It had been alleged that former minister Henry Mussa had been entangled in the NEEF loans.

However, another source at NEEF pointed out that Mussa had not taken any loan.

"Mussa did not take any money he was simply a guarantor for a certain group in his constituency. The group started paying the money and they are remaining with around K3 million," our source said.

Currently, Neef is also disbursing loans, an exercise that started in February 2021.

As of May 7, 2021, NEEF had disbursed K5.8 billion to 2438 clients, which represents about 24380 individual clients going by the minimum membership of group loans which is 10 people.

According to Kapasule they have so far collected K596 million as loans that were disbursed in February, whose due time was March and some in April against a collection target of K613 million.

"That represents a recovery rate of about 97 percent and by extension, this means we have K17 million that is yet to be collected for the loans that were due March and April 2021," he said.

Mzuzu-based financial educator, Theana Anastansia Msolomba who is also a wellness and mind-and-body health trainer said:

"There is need to educate the youth, women (and all the other people) who get the loan on financial prudence and discipline. This is a very important aspect of the process."

Added Msolomba: "When some of these people get the loans, they don't put the money to good us so they can have some to pay back when their time to repay is due and that is what put them under the bridge, but also make the lending institution hang in financial imbalance.

Msolomba explained that NEEF needs to learn from the past and refrain from politicising the loan facility because once politics creeps in, the situation becomes irreversible as now people get loans not because they qualify, but because they are politically connected.

"While there is a greater need to put proper mechanisms on loan collection by the lenders, clearly stipulating the boxes eligible people need to tick to be able to be granted such loans, the beneficiaries seriously need financial education in order for them to be able to manage their finances and moves their lives forward.

"Malawi's poverty levels are high, that is an indisputable fact, a lot of people do not have resources much that it is the wish of everybody to have capital and start businesses, but at the end of the day this is a revolving fund.

"This means the funds have to be given back so that many others can also benefit too. There is absolutely no point and logic in giving loans to people will can only afford to borrow but not pay back," said Msolomba.

The loan facility was increased from from K15 billion to K40 billion.

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