A Crane Bank branch in Lira before its acquisition by DFCU Bank. PHOTO | MORGAN MBABAZI | NMG
Norway and the Netherlands have asked Uganda to protect DFCU
Bank from bad publicity, which they say is affecting investor
confidence.
In a letter to the Minister of Finance
Matia Kasaija, Annlaug Ronneberg who is in charge of business affairs at
the Norwegian Embassy and Henk Jan Bakker the Netherlands ambassador to
Uganda have warned that the negative sentiment could affect foreign
direct investment flowing into the country.
Norway and
the Netherlands have an interest in the matter that has refused to go
away because Arise B.V, the majority shareholder in DFCU Bank is owned
by Norwegian and Dutch investors — Norfund, Norfinance, FMO and
Rabobank.
The bank has attracted bad publicity, mainly
online, since it acquired Crane Bank in January 2017 at a cost of Ush200
billion ($52.8 million) and then went ahead to more than double its
profit in a year.
Its net profit grew from Ush46.2 billion ($12.2 billion) to Ush127 billion ($33.5 million).
More controversy
Crane Bank’s former owner Sudhir Ruperalia claimed the Bank of Uganda took over his bank in bad faith and sold it off cheaply.
DFCU Bank has threatened to sue some online publications and Mr Ruperalia’s son over this bad publicity.
By
the time the embassies wrote in, there were reports that Britain’s
Commonwealth Development Corporation, the second biggest shareholder in
DFCU Bank, was in the process of looking for a buyer.
Analysts
at the time speculated that CDC’s managers were looking to exit DFCU
Bank while its books showed it was at its best moment, perhaps believing
that the lifeline that came with the acquisition of Crane Bank would
not last.
That is not all the controversy that the sale has generated.
Mr
Ruperalia has also sued DFCU Bank to try to recover some properties
that he argues were not owned by Crane Bank, but were taken over and
sold by the Bank of Uganda.
Probe
This
is in addition to an ongoing probe by the Parliamentary Committee on
Commissions, Statutory Authorities and State Enterprises into the Bank
of Uganda’s closure of seven commercial banks over the past 25 years.
Anita
Among, the committee’s vice chairperson, says parliament is no longer
sure of the Bank of Uganda’s management’s abilities to handle the
financial sector.
“We would like to find out why these commercial banks are collapsing. We would also like to know the Bank of Uganda’s role in the collapse of these commercial banks,” she says.
“We would like to find out why these commercial banks are collapsing. We would also like to know the Bank of Uganda’s role in the collapse of these commercial banks,” she says.
So
far, the Bank of Uganda has been caught on the back foot. On November
1, the committee threw the Bank of Uganda officials including Governor
Emmanuel Tumusiime-Mutebile and his deputy Louis Kasekende out of
parliament after they failed to present critical documents on the
closure of seven commercial banks.
Rationale questioned
The
Cosase is using as a blueprint for the investigation, a report by the
Auditor General, in which the Bank of Uganda has been accused of
committing a number of illegalities during the process of liquidating
the seven commercial banks.
The commercial banks, which
were closed over a 25-year period, were Teefe Bank, International
Credit Bank, Greenland Bank, Co-operative Bank, National Bank of
Commerce, Global Trust Bank (GTB) and Crane Bank.
One
of the issues that the committee will query is the Auditor general’s
report that DFCU Bank was sold a clean and recoverable loan book worth
Ush570.4 billion ($150.6 million).
The Auditor General questions the rationale for the low sale price of only Ush200 billion ($52.8 million).
The
Auditor General says that when Bank of Uganda officials were asked
about this anomaly, they claimed that DFCU had been sold the bad loan
book as well. According to the Auditor General, Bank of Uganda officials
lied when they claimed to have sold Crane Bank’s bad loan book.
Illegality
DFCU Bank had earlier benefited from a process to sell Global Trust Bank.
GTB
was closed in 2014. Following this closure, the Auditor General says
Bank of Uganda sold well secured loans belonging to GTB at a discount.
The Auditor General says this is illegal under the Financial Institutions Act.
The Auditor General says this is illegal under the Financial Institutions Act.
The
DFCU Bank’s links to at least two of the defunct commercial banks that
are under scrutiny means that negative perceptions will continue for as
long as the cases in court and the Parliament and Inspectorate of
Government investigation into Bank of Uganda are ongoing.
Parliament
has on several occasions attempted to probe Bank of Uganda and has even
recommended Governor Tumusiime-Mutebile’s removal, but this has not
happened.
Neither Mr Kasaija nor any of his colleagues in the ministry have yet responded to the request by Norway and the Netherlands.
A state minister told The EastAfrican that DFCU Bank should bear the responsibility of cleaning its own image.
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