KENYA-MONEY CRISIS Kenya faces money crisis, analysts say it's temporary

Record ID: 135695

  • Title: KENYA-MONEY CRISIS Kenya faces money crisis, analysts say it's temporary
  • Date: 19th October 2015
  • Summary: (SOUNDBITE) (English) HABIL OLAKA, KENYA BANKERS ASSOCIATION CEO, SAYING: "It is a temporary thing which should not be viewed as a picture of the economic performance of the country. Similarly for the banking sector, what happened to Imperial bank and Dubai bank previously should not be seen as something that is prevalent for the whole banking sector and is not a reflectio
  • Embargoed: 3rd November 2015 12:00
  • Keywords:
  • Location: Kenya
  • Country: Kenya
  • Topics: General
  • Reuters ID: LVA6O7HAP6UJHL3R8D8UY7NNE9O3
  • Aspect Ratio: 16:9
  • Story Text: Kenya's central bank last week put Imperial Bank Ltd under management for 12 months after becoming aware of "unsafe or unsound business conditions of the lender".
    All operations apart from loan re-payments have been suspended leaving customers outside the bank's locked doors and unable to access their deposits.
    "I am a depositor with this bank, Imperial bank and I heard that the bank has been put under receivership. I was very much worried because I knew I had some projects here and there that I was supposed to effect and I had some workers that I needed to pay so it was very devastating news to me," said John an Imperial Bank customer that refused to give his second name.
    The bank was started in 1992 and was ranked 19 out of Kenya's 45 lenders at the end of 2014. On June 30 this year, it reported assets of 70.3 billion shillings ($684 million).
    The Central Bank of Kenya said it appointed the Kenya Deposit Insurance Corporation (KDIC) to manage Imperial Bank for 12 months after Imperial's board alerted it to "inappropriate banking practices that warranted immediate remedial action."
    Imperial Bank is the second bank in Kenya to be put under management since August, when Dubai Bank Kenya Ltd, a very small lender, was put in receivership after liquidity problems.
    Banks are required to maintain a specified ratio of their total book value as cash reserve in order to meet financial obligations. When they fall short of these requirements they can be placed under receivership.
    Habil Okaka is the CEO of Kenya Bankers' Association.
    "There are a number of alternatives, if they find that there is a possibility Of the bank being managed back into the normal operations with the help of the board of directors, I think that is the first route to be taken. In the event that is not possible and they have to go the route of liquidation, then that needs to be determined pretty quickly in which case then the Kenya Deposit Insurance Corporation will use the fund that it has, more or less the insurance fund that it has to pay off the depositors who are within the insured limit which is 100,000 Ksh. So those depositors are paid off immediately and then the depositors that are above the 100,000 limit are the ones who are normally paid out of the assets that are realized by the liquidator as he proceeds along," he said.
    The World Bank said east Africa's biggest economy was facing headwinds from currency volatility and tighter monetary policy.
    Kenya's shilling has lost 14 percent against the dollar this year and interest rates have climbed by 300 basis points.
    Last week lawmakers summoned Finance Minister, Henry Rotich to answer questions about the sharp rise in interest rates on government debt and delays in payments to civil servants, which one parliamentarian described as unacceptable and a "security risk" to the country.
    Witnesses said the door of one of Imperial Bank's branches in central Nairobi was shuttered when several customers gathered at the door.
    Despite fears, analysts say the current cash flow crisis in the government and banking sector will not last.
    "It is a temporary thing which should not be viewed as a picture of the economic performance of the country. Similarly for the banking sector, what happened to Imperial bank and Dubai bank previously should not be seen as something that is prevalent for the whole banking sector and is not a reflection of the whole industry. It is not a systemic problem," said Okaka.
    Kenya trimmed its 2015 growth forecast to 6 percent from 6.5 percent. Rotich cited deteriorating growth outlook for economies across the world.
    The World Bank put 2015 growth at 5.4 percent.
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