Chase Bank, Imperial lock in tea farmers’ Sh4.8bn

The Imperial Bank head office on Westlands Road in Nairobi. PHOTO | FILE 

By GERALD ANDAE, gandae@ke.nationmedia.com

In Summary

• The KTDA relies on investments such as interest income from fixed deposits and dividends from subsidiaries to supplement the 2.5 per cent management fee it charges tea factories to oversee processing, sales and marketing of their produce.
• Betting firm SportPesa, the Law Society of Kenya and thousands of small and medium enterprises are some of the institutions whose money has been locked in Chase Bank after it was shut down.

The recent shutdown of Chase Bank has locked in Sh1.9 billion belonging to the Kenya Tea Development Agency (KTDA).

The collapse of Chase Bank is likely to have a serious negative impact on KTDA’s liquidity, coming hardly six months after the closure of Imperial Bank cut its access to another Sh2.9 billion.

The account in the troubled Chase Bank is one of the 21 that KTDA operates. Managing director Lerionka Tiampati said the agency opted to open numerous accounts in different banks as a risk mitigation measure.

Last week’s shutdown of Chase Bank brings to Sh4.8 billion the total amount of money that the agency, formed to champion smallholder farmers’ rights, cannot access for its operations. Farmers have previously protested what they saw as low bonus payout by the agency.

Mr Tiampati, however, maintained that the closure of Chase Bank has not crippled the agency’s operations, even as he urged the government to move with speed to address the underlying issues that threaten Kenya’s banking sector.

“We had Sh1.9 billion at Chase Bank when it was placed under receivership, but this has not affected our operations in any way since we have other accounts with different banks,” said Mr Tiampati.

Interest income

The KTDA relies on investments such as interest income from fixed deposits and dividends from subsidiaries to supplement the 2.5 per cent management fee it charges tea factories to oversee processing, sales and marketing of their produce.

The 66 factories under the KTDA are supplied by nearly 600,000 small-scale tea farmers.
The KTDA is expected to make initial tea payments, commonly referred to as mini-bonus, between April and May to be followed by the main bonus later in the year. Last year it paid Sh14.5 billion in mini-bonus.

READ: Fall of Chase Bank hits small scale entreprises

In October, days after the collapse of Imperial Bank, KTDA made Sh28.7 billion bonus payments to the tea growers.

Betting firm SportPesa, the Law Society of Kenya and thousands of small and medium enterprises are some of the institutions whose money has been locked in Chase Bank after it was shut down.

SportsPesa is reported to have had more than Sh500 million from its gambling operations. The firm is the official sponsor of the Kenyan Premier League.

The United Nations Sacco had Sh800 million at the bank under fixed deposits.

Chase Bank became the third lender to go into receivership in just nine months after Imperial Bank’s closure last October and Dubai Bank’s July shutdown.