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Citizen Weekly

Sunday, 7 December 2014

QUERIES IN MWALIMU SACCO, EQUITORIAL BANK DEAL



Even as Sacco Societies Regulatory Authority plans to to sanction Mwalimu National Sacco’s bid to get a majority shareholding in Equatorial Commercial bank, the bid is being viewed with suspicion by a section of the board of directors.
Informed sources say that prior to the move which was initiated by its late chairman, the board had withdrawn its shares and banking activities with Co-operative Bank in suspicious circumstances to transact with another local bank. Mwalimu Sacco’s current financial status is said to be shaky. In fact, as a result, pressure was on its late chairman who aware the future is bleak and the directors were baying for his blood for engaging in white elephant projects, died due to stress.
Industry players say that why Sasra chief executive Carilus Ademba argues the regulator will not block the bid, on grounds a delay could result in Mwalimu Sacco incurring losses which is already happening, has left many guessing.
Why Mwalimu Sacco rushed and signed a controversial contract without due diligence is suspicious. It is said the Sacco is not using member funds to acquire the bank. However, there is more than meets the eye. The so-called private funds are suspect and members may have been duped to pass the resolution.
Equatorial Commercial Bank for starters, is not solid with claims its current status is shaky and rocky. It has not experienced any growth but operates on thin capital margins.
The bank’s profit after tax in the nine months through September fell by more than half to Sh49 million from Sh100.9 million last year and was rated the worst performing banking institution.
To show how bad things are at the institution, its core capital, the total sum invested by shareholders, stood at 8.72pc of its deposit base compared to statutory requirement of 8pc. Already, Central Bank is said to have raised a red flag at the bank.
Desperate, the bank’s management is aware that statutory ratio is set to be increased to 10.5pc at the end of the year. As a result and in order to survive, the bank has to inject additional capital as fast as it can. To salvage it from imminent collapse, Mwalimu Sacco is the saviour.
Questions are being asked if Sacco bosses are aware that ECB’s total capital-to-risk weighted assets, which mainly consists of loans, stood at 13.25pc in September compared to the required 12pc. To break even, it has to meet a new ratio of 14.5pc by the end of December less than a month from now.
With word the Ademba team has been compromised by those involved in the transactions, now eyes are on Competition Authority of Kenya which has a role to play.
We have information that aware of the scam, the government has been concerned and even froze the multi-billion shillings project. The audit and valuation report on the bank has raised suspicion with word that internal trading and manipulation of shares was discovered.
Consequently, the bank has experienced losses in 2010 and 2012. In 2012, the bank recorded a Sh500 million loss as capital levels fell below the statutory levels forcing Central Bank to intercede.
The majority shareholder is tycoon Naushad Merali. How Mwalimu Sacco entered the deal to run the bank as a subsidiary in its operations has left many questions unanswered. Mwalimu claims to be the leading Sacco by asset base in the country, with assets to the tune of Sh24 billion. However, the construction of its headquarters is said to have been used to swindle members and almost brought it to its knees. Members complain of not getting loans as it used to be. Membership has dropped from 57,277.
A key player in the controversial bank deal is Sacco’s chief executive Robert Shibutse. He was an executive director at ECB but left in unclear circumstances.
The deputy general manager (finance) is Emmah Orua. Jotham Gichui is the DGM internal audit, Jairus Ounza is the business loans manager and Alphonce Kaio is the head of Fosa.
The board members are Teresia Mutegi, Michael Waweru, Constance Wasike, Benson Milai, Roseline Ochieng, F  Mwamburi and Wellington Otiende.
The supervisory committee members are Benjamin Teigong who is also the supervisory committee chairman, John Ochieng’ who is the supervisory committee secretary and James Kimani.
As things stand, the future of the deal is questionable, more so, with the bank out not to include strategic assets in the contract only preferring to offload weak ones. Will a section of members move to court to block the bid as they plan?