There has been a lot of excitement and anger after the recent court ruling on compensation linked to the closure of Finance Bank in 2005. Many people are treating this as a simple matter of “the bank was closed unfairly, so just pay them.”

Charles Kabena: The author

But that story leaves out very important facts.

Finance Bank was not closed for small mistakes. It was shut down by the Reserve Bank of Malawi (RBM) over serious regulatory problems. According to official reports, including from KPMG, the bank was:

• Accused of illegal foreign currency dealings.
• Found in breach of the Banking Act of 1989.
• Alleged to have used fake accounts to move foreign money out of Malawi.
• Not following basic Know-Your-Customer (KYC) rules.

These were not technical errors. These were issues that threatened the integrity of the entire financial system.

After RBM revoked its licence, a court allowed a judicial review. But crucially, the bank itself later chose to go into voluntary liquidation. It was not forced. That decision matters.

Now fast forward.

In 2013, the same owners returned with New Finance Bank. Same leadership, same people. But this “reborn” bank lasted less than five years before collapsing under heavy losses. Eventually, 100% of its shares were taken over by Nedbank, which later became Centenary Bank.

In simple terms: when given a second chance under normal conditions, the same management failed again.

So this raises a very serious question:

If Finance Bank had not been closed in 2005, is it guaranteed that it would still be making profits in 2026?

Or is it just as likely that it would have failed anyway, like its successor did?

This uncertainty is the heart of the problem.

The compensation being discussed is based on “lost future profits” — meaning the court is assuming the bank would have grown successfully for 21 straight years. That is a very big assumption.

But in real life, we had:

• A global financial crisis in 2008
• COVID-19 in 2020
• Repeated floods, droughts, and economic shocks in Malawi

Many well-run banks struggled during these times. Some collapsed. So why are we pretending Finance Bank would have survived everything perfectly?

In finance and law, this kind of compensation is called counterfactual profit — money based on something that never actually happened. And experts usually argue fiercely about how such profits should be calculated, because they are highly uncertain and easy to exaggerate.

Yet here, Malawian taxpayers may be forced to pay billions based on a story that has no solid proof.

To make it worse, international media like the Mail & Guardian once reported that the same bank owner was linked to an attempt to bribe former President Joyce Banda. Whether related or not, it raises serious moral and credibility questions.

So the fear is this:

Are we about to reward people who broke the law, failed at banking twice, and may now walk away richer than the country itself?

If the assumptions behind this compensation are not carefully challenged, then Malawi is not correcting an injustice — it is legalising a robbery through the courts.

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