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HomeGENERAL NEWSMwalimu National Sacco: Senate Probe the Questionable Sale Of Spire Bank To...

Mwalimu National Sacco: Senate Probe the Questionable Sale Of Spire Bank To Teachers

The Senate Committee on Finance and Budget has started a probe into the dubious sale of Spire Bank to Mwalimu National Sacco (MNS) at an estimated Ksh3 billion ($28 million).

The Sacco board blamed the poor performance of the lender on business tycoon Naushad Merali who is said to have withdrawn all deposits amounting to Ksh1.7 billion ($15.74 million) shortly after trading his shares in the bank.

The lawmakers are examining the transaction that has drawn the attention in investment circles and are commanding a piece of information from Central Bank on how teachers were duped into investing money in a business that has failed to make profits in the last 6 years.

Led by Kirinyaga Senator Charles Kibiru on Wednesday, the committee asked that the due diligence reports of the transaction by the Central Bank of Kenya (CBK), Ernst & Young (financial advisors), and the lawyers that drafted the transaction agreement to be tabled.

The committee also demands to have the latest audited financial statements of Mwalimu Sacco to ascertain the financial well-being of a society owned by more than 75,000 teachers.

The reports are required by May 4, 2021, when senators will question individuals in a closed-door sitting.

“It is a surprise that all of a sudden after Mr. Merali has sold his shares we have a situation where as a bank you are looking for a strategic partner. Does it mean that the due diligence was never done properly before Mwalimu Sacco got into this mess? Because it looks like a mess,” said Senator Kibiru, the committee’s chairman.

The senators also discovered that the transaction between Mwalimu Sacco and Merali share sale is pending approval by the Registrar of Companies and that the financial advisors, Ernst & Young, gave a clean bill of health to the transaction and later got appointed as auditors of the bank.

The Sacco cited the bank’s woes of huge deposit withdrawal by Mr. Merali and the panic in the banking business that led to investors withdrawing deposits from small banking institutions.

“One thing as an investor representing Mwalimu National Sacco, which we are aware of, is that when Mr. Merali was still part of the bank he had huge deposits there which he, later on, withdrew in 2016 to the tune of Ksh1.7 billion ($15.74 million) and coupled with what happened at Imperial Bank and Chase Bank there was some sort of panic and there were also withdrawals by the customers so I think this weakened the financial base of the bank,” Wellington Otiende the SACCO chairman informed the committee.

The financial advisors, Ernst & Young, have also been blamed for failing to weigh the ‘risk’ considering that Spire Bank, was being pressed together by just a single person with a tremendous amount of deposits.

The bank’s data reveals that at least Ksh9 billion ($81.81 million) worth of deposits have been withdrawn by customers between the years 2015-2020, with total deposits declining from Ksh14.3 billion ($130 million) in 2014 to Ksh4.82 billion ($43.81 million) in the third quarter of 2021.

customers’ Loans and advances also reduced by Ksh7.16 billion ($65.09 million) to Ksh2.9 billion while net losses worsened to Ksh783.58 million ($7.12 million) from Ksh326.43 million ($2.96 million) during the same period.

The bank acquired Ksh8.13 billion ($73.9 million) in losses leading to liquidity and capital deficiencies as entire shareholder funds turned to negative Ksh1.32 billion ($12 million) in the 9-month period to September 30, while core capital operating in the negative territory of Ksh2.36 billion ($21.45 million) as opposed to the statutory limit of Ksh1 billion.

About 75,000 teachers who have invested in the Mwalimu Sacco are crying foul on how their investment was carried out without proper due diligence putting their hard-earned savings at risk.

Mwalimu’s Sacco’s fundamental investment of Ksh2.4 billion ($21.81 million) in the bank has since been diluted by about 50 percent (Ksh1.2 billion). Its share sale deal has been opposed by numerous agencies before until 2014 when they decided to give approvals.

The Co-operative Alliance of Kenya had raised a red flag on the credibility of the whole transaction, claiming that due process was not observed.

Six years ago, Mwalimu Sacco took ownership of Spire Bank (previously Equatorial Commercial Bank), by earning 75 percent shareholding from the billionaire businessman Mr. Merali at a price of Ksh2.4 billion.

In November 2020, Sacco obtained 100 percent ownership of the bank by purchasing the outstanding 25 percent shares held by Mr. Merali.

In 2019, top Kenyan lawyers led by Paul Muite and Ahmednasir Abdulahi called for the arrest of Sameer Africa’s chairman Naushad Merali after millions of shillings were swindled.

The lawyers, wanted Merali arrested for engaging in graft as it was alleged that he was trying to bribe President Kenyatta. Seven suspects were later arrested and charged for impersonating President Uhuru to obtain a Ksh80 million facilitation fee for a land deal in the capital city. The seven denied the charges and were freed on a Ksh 20,000 each.





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