Mahapola Trust Fund comes under fire over controversial investments
The Mahapola Higher Education Scholarship Trust Fund established three decades ago in 1981 by then Education Minister Lalith Athulathmudali to assist the needy university students has come under fire over its controversial past and present investments.
The Trust Fund has invested in a partly state- owned leasing and finance company violating the Cabinet decision of August 28 2018, public interest activists and university student unions alleged.
In a bid to formalise investments of the Mahapola Trust Fund, the Cabinet of Ministers had decided on August 28, 2018 to liquidate National Wealth Corporation Ltd and the National Wealth Securities Ltd, investment management sub companies of the Fund, and invest all Mahapola Funds only in state banks and Central Bank bonds.
Violating this cabinet decision, the present authorities of the fund have invested a sum of over Rs.1.26 billion in a fixed deposit of People’s Leasing and Finance company which is listed in the Colombo Stock Exchange.
This fund transfer has been made following a letter of request (a copy of the letter in possession of the Business Times) relating to this transaction sent to the finance company under the signature of M. P Bandara on 29- 03 -2019.
The People’s Bank has a 75 per cent stake in People’s Leasing and Finance Company with the balance shares held by the public. An investment analyst said that this investment was risky as the Cabinet has clearly stipulated that all investments of Mahapola Funds should be confined to state banks or bonds.
The two fund management companies set up to handle Mahapola Trust Fund are billed to be liquidated after incurring losses of over
An investment analyst said that this investment was risky as the Cabinet has clearly stipulated that all investments of Mahapola Funds should be confined to state banks or bonds.
Rs. 2.5 billion during the last 15 years, a Cabinet Memorandum presented by Higher Education Minister Wijayadasa Rajapakshe revealed.
According to an assessment of losses computed by the ministry in the period 2003-2017 the fund had incurred an estimated Rs. 1.687 billion loss of earnings.
The loss incurred by the Mahapola Principal Fund from 2013 to 2014 due to investments under an interest rate below the average market interest rate was Rs. 567.21 million.
Amidst these irregularities, in a gazette, notification issued on September 21, 2015 Mahapola has been transferred to the Ministry of International Trade and Development Strategy under Minister Malik Samarawickrama.
Subsequently the fund used to invest in shares through Wealth Trust Securities even though state- owned National Wealth Securities is there for such matters.
Money held by the Mahapola Higher Education Scholarship Trust Fund, which is estimated to be about Rs. 10 billion has been managed by the Natwealth Corporation ( NWC) which is a stateowned entity.
Funds held by the NWC were in turn invested by its subsidiary Natwealth Securities, which functions as the trading arm of NWC.
Natwealth Securities then invested the funds in a variety of state and non-state instruments including commercial papers, asset backed trust certificates, bonds and treasury bills.
A complaint was lodged with the Bribery or Corruption investigation Commission, alleging that funds given to Natwealth Securities was traded in an unfair manner at a loss to the Mahapola Trust Fund.
According to a list of all non- state investments made by Natwealth Securities, this trading arm dealt with many companies including Rs. 306 million of commercial papers with People’s Merchant Finance, Melsta Regal Finance, and Asset Backed Trust Certificates of Rs. 194.7 million with People’s Leasing and Finance Plc.
The largest component of over Rs. 1 billion is in summary debentures, with top banks and leasing companies including Bank of Ceylon, Commercial Bank, First Capital Holdings, HDFC Bank, LB Finance, Nations Trust, Seylan and Sampath Bank.
The primary issue during the past period was the fact that funds of the National Wealth Corporation Ltd and NatWealth Securities Ltd were being diverted to an external company allowing it to make investments haphazardly.
It was also revealed at the Presidential Commission of Inquiry that these companies suffered heavy losses due to the Central Bank bond scam.