Money Markets
By DAVID HERBLING
The Central Bank of Kenya (CBK) has denied a local
investment group partly backed by the Kenyan diaspora a licence to
operate a deposit-taking microfinance bank barely two years after it
granted them interim approval.
Kenya’s banking regulator’s refusal to grant Fountain
Enterprise Programme (FEP) Group approval has forced the chama to
abandon the quest and turn the proposed micro-lender into an investment
vehicle.
CBK in mid-2014 issued a temporary approval to FEP
to set up Fountain Microfinance Bank, pending vetting to establish
capital adequacy, ownership, and suitability of directors to run a
banking business.
“Following notification from the regulator in March
2016 that our licence was not approved as anticipated due to a stricter
regulatory environment, the board of Fountain Microfinance explored
other options for the company,” said John Kithaka, co-founder and chief
executive of FEP, in a note to shareholders.
When reached for comment, Dr Kithaka declined to
reveal the reasons behind the licence denial. CBK had earlier asked FEP
to clean up its shareholding list which included names of chamas that
are not recognised as legal persons.
“The shareholders approved the transition of the
company to Fountain Global Investors Plc. The shareholders further
approved the change of the objects of the company from banking to
carrying on the business of an investment company,” said Dr Kithaka in a
memorandum dated July 1, 2016.
FEP’s footprint in the financial industry includes a
five per cent stake in the Nyachae-controlled Credit Bank (where it is
seeking control), 60 per cent holding in mobile money platform MobiKash
and two wholly owned firms: Fountain Credit Services, and Nobel
Insurance Agency.
CBK governor Patrick Njoroge refused to disclose
reasons behind the regulator’s decision to deny FEP a microfinance
banking licence despite granting an interim approval via a letter of no
objection.
This throws FEP into disarray given that it had
begun recruiting personnel for the proposed microfinance bank and
incurred Sh25.5 million in staff costs last year from Sh1.8 million in
2014.
Fountain Microfinance Bank saw losses more than
double to Sh42.9 million as at December 2015 from Sh18.01 million a year
earlier.
Dr Njoroge in November last year suspended
licensing new commercial banks following rapid-fire bank closures that
claimed two lenders in as many months: Dubai Bank (August 2015), and
Imperial Bank (October 2015).
Chase Bank collapsed in April this year and is currently in receivership under the management of KCB.
However, CBK’s moratorium was silent on whether it extended to deposit-taking microfinance banks.
Kenya has 13 licensed deposit-taking micro-lenders
who had a loan book of Sh45.7 billion as at December 2015, according to
CBK data.
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