Teachers will cut all ties with the loss-making Spire Bank by the end of March this year, easing a heavy financial burden on their Sacco’s books.
In a statement dated January 12, Mwalimu Savings and Credit Corporation chairman John Ochieng told members that Sacco would sell or kill the lender, which they bought from the late billionaire Naushad Merali in 2015. .
“It is time for Sacco to cut its losses from the Spire Bank business and it must be done now,” he said.
Mr Ochieng said the Sacco has not injected and will not inject additional money into the ailing lender. “We will not tire of ensuring that this matter is brought to fruition despite the efforts of disgruntled forces, whose sole objective is to sabotage this deserving initiative through sensational media reports designed to sow panic among the membership.” , did he declare.
Sacco also plans to slow its real estate business by pulling out of Mwalimu Assets Management, offloading the remaining homes under a project in Kisaju in Kajiado County, and some land.
It will also put capital intensive projects on hold until it divests from deficit investments to protect member deposits.
But it is the need to solve the Spire Bank problem that is at the heart of Mwalimu Sacco.
They plan to achieve this by first trying to find a suitable buyer – a daunting task for a lender who has violated all capital adequacy and liquidity ratios.
With a negative minimum capital ratio of 3.4 billion shillings in September 2021, compared to the regulatory limit of 1 billion shillings, an investor must inject 4.4 billion shillings in order for the bank to appear on the good books of the country. sector regulator.
In addition, the bank’s bad debts have already exceeded its total loan portfolio, which stood at 2.1 billion shillings during the period.
The second option, Ochieng said, is for the bank to be voluntarily liquidated. This can only be done with the approval of the Central Bank of Kenya (CBK) provided the company demonstrates the ability to meet all of its commitments. However, since Sacco is unwilling to pump more money into the bank, it could leave the burden of “killing” the lender to the financial regulator.
The giant cooperative – Kenya’s largest in terms of assets bought Spire Bank (then known as Equatorial Commercial Bank) from Mr Merali for 6 billion shillings, hoping to gain a foothold in the commercial banks.
The bank turned out to be an empty shell that has haunted teachers to this day.
Their returns from the Saccos have waned over the years. While the bank was in trouble before the sale, things got worse when Merali withdrew her deposits in the amount of 1.7 billion shillings ($ 15.74 million) immediately after the sale of her stake.
This triggered panic, prompting other clients to withdraw their deposits and further weakening the financial stability of the institution.
Since then, deposits have fallen to less than 5.2 billion shillings in September 2021, from 14.3 billion shillings in 2014. The bank has accumulated losses of more than 818 million shillings during the period.
Spire Bank had 12 branches at the end of 2020. The lender’s latest financial results showed a non-performing loan portfolio of 2.6 billion shillings against net loans and advances to customers of 2.5 billion shillings. Its liquidity ratio now stands at 3.8%, which is well below the CBK requirement of 20%.
This, coupled with other not-for-profit real estate investments, plunged Sacco into a leadership crisis, resulting in bitter board elections in March 2021 and a management reshuffle.