MPs now reject Spire Bank’s CBK loan offer | SehndeWeb

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MPs now reject Spire Bank’s CBK loan offer


A branch of the Spire Bank in Nairobi. FILE PHOTO | NMG

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Summary

  • The National Assembly’s Finance and National Planning Committee has rejected a petition by teachers’ representatives asking Parliament to compel the Central Bank of Kenya (CBK) to provide Speyer with the interest-free loan.
  • The teachers argued that the banking regulator had in the past provided financial support to struggling lenders.
  • Mwalimu CEO Kenneth Odhiambo told MPs that Spire had unsuccessfully approached the CBK directly for funds, forcing them to seek help from parliament.

A parliamentary committee has rejected pressure from teachers for a 2 billion shilling state loan to Spire Bank, dealing them the latest setback in their efforts to save the struggling lender from collapse.

The National Assembly’s Finance and National Planning Committee has rejected a petition by teachers’ representatives asking Parliament to compel the Central Bank of Kenya (CBK) to provide Speyer with the interest-free loan.

The teachers argued that the banking regulator had in the past provided financial support to struggling lenders.

“CBK was making efforts to support Spire Bank Limited to bring it back to profitability using other options, so this prayer (2 billion shillings loan) fails,” the committee said in the report.

The teachers own the bank through their savings and credit union, Mwalimu National Sacco.

Mwalimu National Bag

Mwalimu CEO Kenneth Odhiambo told MPs that Spire had unsuccessfully approached the CBK directly for funds, forcing them to seek help from parliament.

The CBK has provided short-term liquidity of up to 1.3 billion shillings through reverse repos (repurchase agreements), which is short-term and insufficient to revive the bank.

The teachers struggled to find a strategic buyer to inject much-needed capital into the bank, with suitors pulling out at the last minute.

It comes after the Sacco Companies Regulatory Authority (Sasra) also blocked the teachers’ cooperative from pumping additional money into the bank.

The sacco has been supporting Spire for years with funds after the bank racked up losses of 9 billion shillings, including a 3.4 billion shillings conversion of teachers’ deposits into shares.

Mwalimu presented seven potential buyers to the CBK. The regulator told MPs it is carefully engaging potential investors while trying to balance conflict of interest issues and ensuring their credibility.

Spire has been struggling for eight years with losses that have wiped out its capital base and equity, leaving it in breach of CBK requirements.

His misfortunes have also been attributed to late businessman Naushad Merali’s decision to withdraw 1.7 billion shillings in 2016, prompting other customers to withdraw money from the bank.

The committee, in its report tabled in the House last week, rejected the petition, saying the CBK is currently looking for other ways to save the troubled bank.

Mwalimu wrote to Parliament earlier this month for the CBK to grant the loan which he considers essential to avoid the collapse of Speyer.

“Long-term liquidity of support of 2 billion shillings as requested by the bank in 2021 through the CBK. The loan should be interest free, consistent with what had been offered to other financial institutions in similar or worse situations,” the petition states.

Asset base

Speyer’s asset base fell to 4.5 billion shillings in June last year from 13.8 billion shillings in June 2016, while deposits fell to 5.2 billion shillings from 8 .1 billion shillings over a similar period.

Mr Merali withdrew 1.7 billion shillings from Speyer days after selling the lender to Mwalimu, sparking fears among investors who saw other customers withdraw their money.

Mwalimu’s acquisition will also be scrutinized for any foul play after the parliamentary committee ordered the Ethics and Anti-Corruption Commission and the Criminal Investigations Directorate to investigate the deal.

The bank’s capital base has since eroded to negative 3.1 billion shillings from 1.57 billion shillings, underscoring the dire state of the lender that teachers are struggling to sell.

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