Teachers in a panic over the Mwalimu Sacco crisis, seek bailout from CBK for Spire Bank.
Teachers want the government to bail out Spire Bank, formerly Equatorial Commercial Bank (ECB), which is in financial trouble, threatening their Sh2.6 billion savings.
The teachers sought the intervention of the Central Bank of Kenya (CBK) in a petition tabled in Parliament by Alego-Usonga MP Sam Atandi, noting that Spire Bank has been plagued by financial difficulties since 2014.
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- This comes after teachers belonging to Mwalimu Sacco, purchased ECB Bank in 2016, becoming the biggest shareholder. It paid about Sh2.6 billion for a 75% stake in the company.
“As a key stakeholder in Mwalimu National Sacco, teachers are concerned that, should the financial woes facing Spire Bank be left to continue, the lender may end up being wound up, and sink with their hard-earned savings,” reads part of the petition.
The petitioners believe that CBK can assist Spire Bank in overcoming the financial challenges it is currently facing, thereby preventing its impending collapse.
Given the state of affairs at Spire Bank, the petitioners contended that CBK was required by law to intervene. Teachers, he pointed out, make up a sizable portion of the public sector workforce.
The teachers based their petition on CBK’s rescue of other financial institutions facing similar challenges, which resulted in their financial stability being restored.
They urged CBK to provide the lender with credit facilities and other financial assistance.
“The issues in respect of which this petition is made are not pending before any court of law or a constitutional or legal body. Therefore, your humble petitioners pray for the intervention of this House,” said Atandi.
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The petitioners are now requesting that parliament direct the apex bank to provide it with a comprehensive report outlining any efforts, if any, that the CBK has made or is making to extend financial support to Spire Bank in order to prevent its imminent collapse.
It also wants the Departmental Committee on Finance and National Planning to direct CBK to extend financial assistance to Spire Bank as soon as possible.
The committee may indeed make other recommendations it deems appropriate in addressing the petitioners’ concerns. “Your petitioner will ever pray,” the statement concluded.
The news comes just a few weeks after delegates from the giant Mwalimu National Sacco met to decide the fate of the Sacco’s subsidiaries.
On the agenda was a proposal by the Sacco’s board to sell Spire Bank to a strategic investor in a deal in which Mwalimu Sacco would retain a minority stake.
Mwalimu Sacco, Kenya’s largest by assets, purchased Spire Bank from the late businessman Naushad Merali in 2016.
The investment, however, did not produce the desired results, and the teachers soon discovered that the bank was merely a shell.
While the bank was already in trouble prior to the sale, things got worse when Merali withdrew Sh1.7 billion ($15.74 million) in deposits immediately after selling his stake.
The large withdrawal sparked panic, prompting other customers to withdraw their deposits, eroding the institution’s financial stability even further.
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