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Struggling bank's request for Sh2billion loan from CBK rejected

The bank is owned by the largest savings and credit group in Kenya.

Governor Patrick Njoroge of the Central Bank of Kenya

Teachers’ request for the government to bail out struggling Spire Bank through a Sh2 billion state loan was rejected by Parliament.

Mwalimu National Sacco, the largest savings and credit group in Kenya, owns a 100% stake in the lender that is almost collapsing.

The National Assembly Committee on Finance and National Planning turned down a plea from teachers seeking Parliament to compel the Central Bank of Kenya (CBK) to provide the interest-free loan to Spire.

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Teachers argued that the banking regulator had in the past given financial support to distressed lenders.

On the other hand, the National Assembly committee said that the CBK was already helping the bank in other ways.

CBK was making efforts to support Spire Bank Limited in order to bring it back to profitability using other options so this prayer (Sh2 billion loan) fails,” the MPs’ report read.

In a contentious deal agreed approved in 2015, the Sacco paid Sh2.4 billion to late businessman Naushad Merali for a 75% stake in the bank, and purchased the remaining 25% in November 2020.

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Spire Bank's present financial troubles have been connected to a Sh1.7 billion cash withdrawal by late Merali days after selling the lender to the Sacco.

Merali's massive withdrawal in 2016, which was equivalent to a fifth of the bank's Sh8.54 billion deposits at the time, prompted other customers to rush and withdraw cash from the bank.

After years of trying to avoid collapse, Mwalimu Sacco finally decided to sell the bank and is waiting for regulatory approvals to conclude the sale.

Kenneth Odhiambo, the CEO of the Sacco, said they have reached an agreement with a financial institution interested in buying the lender and are awaiting clearance from the Sacco Societies Regulatory Authority and the Central Bank of Kenya to complete the transaction.

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Odhiambo added that the transaction was an asset purchase agreement in which the other party would take over assets and liabilities instead of injecting money through an equity acquisition.

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