Diversified investment firm Fountain Enterprise Programme (FEP) Holdings is offloading its entire Sh107 million stake in third-tier lender Credit Bank.
The decision comes after the regulator, Central Bank of Kenya, declined to approve its application to acquire one quarter of the Simeon Nyachae’s majority-owned lender on grounds of unclear share register and low financial capability.
According to FEP Holdings CEO Maurice Korir, the firm has now cleaned 95 per cent of the register but will now concentrate on other business areas before considering any investment in the banking sector.
Credit Bank had approached FEP to help it improve its capitalisation base and the firm came on board with Sh107 million to help steady the bank that was in losses.
“The problem is not the bank. It actually posted a profit in last quarter. For CBK, any investor in a bank must be adequately capitalised and its share register up to date,” said Korir who previously served as Chief Operating Officer.
The development comes after CBK also denied the firm the licence to run a deposit-taking microfinance bank on similar grounds.
It had been granted temporary approval to run the microfinance business as it awaited the approval.
On the flip-side, Korir told The Standard that members of the firm had been allowed to take up shares in the bank in individual capacity, cumulatively up to 45 per cent.
“Members have directly subscribed for shares in the bank, helping it raise over Sh1 billion,” he said. The drive to inject money in the bank is set to close next week.
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The CEO said with a proper register and improved performance, the firm will be making a comeback in owning a stake in the banking sector in the near future. He said the investment company would instead channel its resources towards beefing up Fountain Credit Services, a microcredit outfit owned by the Group.
“We will wait for two years to see the results of the turnaround strategy. We expect to see profits and improved capital base then we will go back,” he said.
Currently, the investment company still has interests in the financial services sector through entities such as FEP Insurance Agency, Fountain Credit Services and mobile money transfer operator Mobikash.
