Micro Finance Support drops axe on staff after Shs50b loss

At least twelve members of staff of the Micro Finance Support Centre (MFSC), some at senior managerial level, have been suspended as an inquest into a Shs50 billion loss to dubious loans gathers pace.

The suspended staff are accused of having colluded across departments and worked in syndicate to facilitate the processing and approval of loans that would not have been approved if the MFSC’s processes had been followed.

“We have suspended about 12 people, including some senior staff, including heads of departments, but we are still investigating,” Mr Peter Mujuni, MFSC’s executive director, told Monitor, adding, “We have suspended (them) as we investigate deeper. We suspend as we review who did not do what, or who failed to do what he was supposed to do.”

Monitor learnt that the decision to suspend the errant staff was precipitated by an internal investigation that unearthed the syndicated actions that led to the approval of the loans.

Mr Mujuni blamed the dubious loans on failure by some of the suspended staff to play by the book.

“The approver relies on the assurances of the different people who are involved and there are so many stages in the loan process. Usually we ask, did the valuer write an evaluation report? Did someone go and verify the report of the valuer? Did another person review?” he disclosed, adding, “The approver looks at the assurances of about six different people at six different stages before he approves.”

Monitor has established that the suspended staff were from the legal, loans and valuation departments of the centre. They stand accused of forgery and utterance of false documents.

Many of the land titles, valuation reports and in some cases audited books of accounts, all of which are relevant to loans’ application processes, were found to have been forged for fictitious purposes.

“Teams that were sent out to carry out due diligence, the evaluation teams and the credit teams all arrived at the conclusion that most of the land titles that had been presented as collateral for loans were genuine whereas some of them were not. In other cases, the land was said to be existent when it in actual sense did not exist,” our source revealed.

Some valuation reports that were used for some of the loans were found to have been forged. The certified borrowers whose reports MFSC relies on to approve loans denied having authored the reports that had been used to process the loans.

The internal investigation also revealed that some of the land that was used as collateral had encumbrances such as family burial grounds or squatters.

In other cases, it was discovered that the land was not as big as had been indicated, was located in swamps and wetlands or simply did not exist.

Some members of staff, however, accused MFSC’s top brass of having effected the suspensions in a selective manner. 

A manager, who until recently headed the centre’s Nakasero Zonal branch office and is accused of having engineered most of the dubious applications, is alleged to have simply been transferred to the Jinja Zonal office.

“There was disciplinary action against him. He is not there. He was suspended.  He is part of the group that was suspended so that we can dig deeper and see what exactly went wrong,” Mr Mujuni told Monitor.

It was not possible to establish the extent of the damage caused by the dubious loans, but sources at MFSC put the level of risk that the centre has been exposed to at within the region of Shs50 billion.

In his latest report, Auditor General John Muwanga raised the red flag over MFSC’s management of loans. Mr Muwanga’s report revealed that Shs7.8 billion was disbursed to 252 unregistered savings and credit cooperative societies, which exposed public resources to the risk of loss.

The report also pointed out that the centre had in the same Financial Year 2020/2021, written off 167 loans amounting to Shs4.6 billion. The number of loans written off over the years now stands at Shs27.5 billion.

Sources at MFSC have since indicated that the dubious loans for which staff have since been suspended may end up being written off, leading to further loss of public funds. Mr Mujuni was quick to rule out that possibility.

“It is not like someone has run away with the money and we have lost it. Those who got the loans are here. We have their collateral, which we can sell to recover the money,” he said, adding, “Where the collateral is not good enough we still can work with them to either get us another collateral. Where not possible, we can find other ways of recovering our money.”