Malawi Enterprises Development Fund (Medf) Limited says it will not be able to recover about K8.9 billion worth of loans issued by its predecessor Malawi Rural Enterprise Development Fund (Mardef) in 2015.

Medf chief executive officer Mervis Mangulenje said this when Medf management appeared before the Budget and Finance Committee of Parliament in Lilongwe.

Medf is a branded version of two former State-owned enterprises namely Mardef and Youth Enterprise Development Fund (Yedef).

Mangulenje told the committee that as part of the re branding process to a full fledged microfinance institution, Medf conducted an audit which uncovered that the K8. 9 billion was issued to ghost beneficiaries who used fake phone numbers, fake identification cards, and fake locations.

She said: “From the initial K8.9 billion, K6. 4 billion was issued out through the government’s Farm Input Loans Programme (Filp) and the rest was issued as normal business loans to beneficiaries.

“To be honest with you, we cannot recover the loans. It’s a tall order for us because we cannot trace the beneficiaries. When we came in as new management, we found a negative balance which forced us to undertake an audit that uncovered the losses.”

Mangulenje said the handful of beneficiaries they were able to trace were in a state where they could not repay the loan, neither did they possess assets from which to recover the loan.

She assured the committee that the new management aims to clean the mess and rebuild the image of the institution, admitting that they face a bid challenge of people’s perception that Medf money is free government money.

Presenting a catalogue of annual operational losses, Mangulenje said K8.6 billion was lost in 2015, K339 million in 2016, K962 million in 2017 and K642 million in 2018.

In the current 2019/20 performance, a new and performing loan portfolio for Medf as at December 31 2019 increased to K3. 6 billion up from K2.9 billion in June 2019, representing a 24 percent growth.

As of the first six months of the current financial year, Medf recorded an operating profit of K67.5 million against a budgeted profit of K762.7 million for the year ending 2020.

The underperformance, according to Mangulenje, was largely due to delays in getting finance to grow the loan portfolio and profitability.

Mangulenje said the institution planned to borrow K3 billion from commercial banks by July 2019, but banks were shunning them due to their poor performance, until in September when they got K1.5 billion.