Sportpesa, LSK among depositors with funds tied up at troubled Chase bank

Maureen Odhiambo tries to withdraw money from her Chase Bank account yesterday in Mombasa. CBK placed Chase Bank under receivership on Thursday after it was unable to meet its obligations. [PHOTO: MAARUFU MOHAMED/STANDARD]

Bookmakers SportPesa, the Law Society of Kenya and thousands of chamas are some of the institutions whose billions have been locked in Chase Bank after it was shut down.

Yesterday, the betting company said at least Sh500 million of its funds had held in the bank.

“It is above Sh500 million but it has no effect on our operations. If it did you will already have heard it from our customers. The bank appeared very stable and we were shocked. People are really suffering out here,” Sportpesa CEO Ronald Karauri told The Standard on Saturday.

The firm is one of the biggest betting companies in the country and is reported to move around billions of shillings from its gambling operations. It is the official sponsor of the Kenyan Premier League.

The United Nations Sacco also had Sh800 million of member contributions at the bank under fixed deposits, making it one of the biggest casualties.

Another account holder Strathmore University has asked its students not to deposit any money in its Chase Bank account.

“Kindly note that Chase Bank has been put under receivership. Do not deposit fees into the Chase Bank collection account until advised otherwise,” the university warned its students through SMS.

It is not clear how much the university had in the bank, but it could also run into hundreds of millions of shillings. Strathmore had opened its doors to the bank, even housing one of its branches inside the institution, to make it easy for students to pay fees.

The Law Society of Kenya (LSK) was among the first institutions to declare it had money in Chase Bank after the financial institution was placed under receivership. LSK, which had two accounts in the bank, regretted its decision not to withdraw its money from the bank.

“LSK had taken the diligence of inquiring from the Chase Bank management which assured it that news of instability were alarmist,” LSK President Isaac Okero said in a statement.

Okero did not pick our calls yesterday when we sought to find out how much of LSK’s money was held at the bank, but insiders estimate it to be more than Sh50 million.

After it received confirmation from the bank that all was well, LSK stopped a special council meeting that had been convened to resolve whether  or not its funds should be withdrawn from the bank.

Chase Bank had established a big base of small investment groups, popularly known as chamas, which banked with it on the promise of getting more attractive loan repayment terms. It had also endeared itself to small and medium sized enterprises, which constituted a big proportion of its client base.

These are some of the 55,000 depositors who had sank more than Sh96 billion into the bank. There are reports that some of the affected victims have threatened to commit suicide, while others have been admitted in hospital due to shock.

About 1,400 employees of the bank may also lose their jobs.

The bank was placed under receivership by the Central Bank of Kenya (CBK) on Thursday for a period of 12 months after it was unable to make payments and honour transactions.

After news spread that the bank was in trouble, ‘lucky’ customers rushed in and withdrew Sh8 billion in one day, sinking the bank into a major financial crisis.

The trouble was precipitated by an unfavourable report issued by its auditors, Deloitte, after it found that the bank had sunk billions of shillings in bad loans.

The CBK revealed that Chase Bank had lent Sh16.6 billion to some of its directors   in another case of reckless insider lending that has come to haunt Kenya’s banking sector.

Patrick Njoroge, the CBK governor, revealed that the lender had Sh8.7 billion on its loan book that lacked evidence that it can be recovered.

But CBK says the problem at the troubled bank was not similar in scale to Imperial Bank and could be resolved if shareholders came back with a solid proposal on how to recapitalize the bank.