Public outcry and parliament have forced Malawian President Peter Mutharika to suspend the sale of a state-owned bank which has been weighed down by bad loans.
The attempted sale of the Malawi Savings Bank (MSB) was in response to advice from the World Bank and the International Monetary Fund after banking experts said the MSB failed to meet minimum liquidity requirements.
The institutions also said they observed that politically-connected persons got huge loans from the MSB but were failing to repay them, a move they said was compromising the bank’s operation.
This forced Malawian officials to look for investors to buy a controlling stake in the bank.
The privately-owned FDH Financial Holdings Limited became the only bidder, offering about $12 million for the purchase of 75 percent of the bank’s shares, a move which parliamentarians described as an “epic swindle.”
“The committee’s stand was that the process of selling this bank hasn’t been good. And the bidding process didn’t actually have a lot of bidders in it. We really wanted the process to start again,” said Rhino Chiphiko, the chairperson for parliament's budget and finance committee.
The parliamentarians also argued that with over 70 branches countrywide, MSB was the only bank which covered most rural areas, where over 80 percent of Malawians live. They said selling it would deprive these Malawians of banking services.
Civil society groups have pushed for the bank to be recapitalized instead of being sold.
In May they held protests after the government announced that it would pay off $13 million owed to the bank by private sector players, the vast majority of whom were the ruling party’s politicians.
In a petition to parliament, the groups said they would not allow taxpayers' money to be used to pay off loans for “greedy politicians and businessmen." They threatened to hold vigils at parliament and all MSB branches nationwide unless the government complied with their demand.
Gerald Viola, President Mutharika’s spokesperson, told VOA the suspension of the bank sale is not a response to any pressure.
“The president has not been defeated. If anything it's democracy which is at stake here. Look, we have the president who is listening to those that are against and those that are for the sale and come up with a binding solution,” said Viola.
Viola also said the government has established a debt collection unit to ensure those who borrowed money from the MSB pay back their loans.
Parliamentarian Jessie Kabwila is the spokesperson of the leading opposition party in parliament, the Malawi Congress Party. She said the party is treating the suspension with a touch of skepticism.
“We welcome the suspension but we just want to be cautious that this should not be a way, to just buy time so that the budget is just passed, and then we see the issue come back again. So for us we would have been happier with a cancellation of this whole thing because that one would have totally been in tandem with what Malawians are trying to say,” said Kabwila.
Economists have warned that the uncertainty surrounding the bank could cause customers to withdraw their deposits, a situation that would make the bank's financial position even worse.