Two weeks ago, an unnamed woman called this reporter to tell him that she had been denied access to Sh46,000 that she had deposited in First Community Bank.
"Something is not right here. Can you talk to the manager (of First Community Bank) and find out what is going on?" she requested, asking not to be identified.
Her fears came to pass. The Islamic lender is now grappling with panic withdrawals as mobs of depositors pour into its branches to repatriate their money from what they fear might turn out into yet another sinking bank.
The management has since pleaded for calm, noting that they are working with the Central Bank of Kenya (CBK) to find a lasting solution.
But with the trust gone, the assurances from the management have been landing on deaf ears.
First Community is experiencing what is technically known as a bank run. A bank run occurs when large groups of depositors withdraw their money from the bank in droves, fearing the collapse of the institution.
Yet, the banking system is built in such a way that should a bank run out of cash, there are multiple places it can easily tap into.
This includes the interbank market where banks lend and borrow from each other overnight.
The interbank market's entire purpose, says Deepak Dave, a financial analyst formerly of Riverside Capital Advisory, is to be the early warning system.
What is needed for First Community now is a fire hose, and that is CBK.
"What you see is what is meant to happen. When bank peers won't provide cash it is for the good reason that they don't believe the bank will pay it back," Mr Dave told The Saturday Standard.
Like many other tier three banks that have either gone under or been forcefully married into larger banks, the red flags were conspicuous in the financial books of First Community Bank - if only analysts care to comb through them.
But the tiny, unconventional bank's survival - like that of many other small banks that some cynics do not understand how they get to attract depositors - has been a mystery in the first place.
Even more interesting is how CBK, the financial regulator, does not seem to have ready answers for the depositors who are being restricted on withdrawals.
A fully-fledged Shariah compliant bank, First Community started operations in Kenya on June 1, 2008.
On its website, the bank says by offering services that comply with the Shari'ah (a body of religious law that forms part of the Islamic tradition), it is able to "serve customers more ethically than other banks."
One of the features of Islamic banking is it prohibits charging of interest, which is frowned upon as riba or usury.
Whereas Shari'ah-compliant banks can charge a late penalty, the money is not used for the benefit of the bank, instead it is donated to a charity.
To make profits, Shari'a-compliant banks invest the funds received from customers under Shari'a-compliant modes of financing.
For most banks, says Dave, the first line of defense in liquidity hierarchy is deposits, which were not adequate in the case of First Community Bank.
By end of June, for every Sh8 the lender had given out in net financing (or what conventional banks would call loans), it had Sh10 in customer deposits.
This was higher than the industry average of Sh7.5 against Sh10, meaning that for First Community, a big chunk of its customers' deposits were tied up in loans.
It is still possible for the bank to pay depositors their money if it has enough of the money that has been paid by shareholders and cash retained from profits, or what is technically known as the core capital.
However, by the end of December last year, there was only Sh5.2 core capital for every Sh10 of customer deposits, below the minimum statutory level of Sh8 and industry average of around Sh17.
If this is not readily available, then you move to the next line, which is seeking help from other banks by getting a short-term facility that would help it assuage the agitated depositors.
This is a short-term, overnight facility that attracts an interest. On Wednesday the rate was an average of 5.2 per cent, except for a few banks that offer Islamic banking such as KCB, Gulf Bank or Dubai International Bank.
Unfortunately, First Community has a product mix that is not understood by its peers, says Dave.
"It is not at all surprising that they left it to CBK," he says of the banks not lending to the cash-strapped First Community.
Repurchase agreements (Repo) - a form of short-term borrowing for dealers in government securities - was also not available to the bank due to its Sharia laws that prohibit charging of interest.
And even though First Community could not raise conventional debt instruments such as bonds, they could raise Shari'ah-compliant debts from other Islamic banks, both locally and abroad.
"The fact that they have not been able to attract liquidity points to underlying problems with the institution or its assets and not because it is an Islamic bank," said independent analyst Soud Mohamed.
But before First Community could move to the last lender of resort, that is CBK, it had the option of asking its shareholders to come to its rescue.
In the footnote of the unaudited financials for the first half of 2022, the lender revealed that on June 30 its shareholders, who include prominent lawyer Ahmednasir Abdullahi, pumped in an additional Sh510 million through a rights issue.
This pushed up the bank's core capital - the minimum amount of money that a bank must have, either from its owners or profits, to protect depositors against unexpected losses - to Sh1.7 billion.
On June 30, 2021, the bank's core capital stood at Sh922 million, below the minimum threshold of Sh1 billion.
It increased to Sh1.12 billion in December 2021, before slightly dropping to Sh1.1 billion in March 2022.
In the last five years to 2021, First Community's core capital had dipped below the Sh1 billion threshold three times.
Moreover, since 2018, nearly all the other capital adequacy ratios - which are also critical for telling the ability of a bank to meet its obligation, including sudden huge withdrawals - had been below the minimum regulatory threshold.
Not that this is a major transgression, a good number of banks breach the ratios due to business cycles or because the deposit-taking and lending functions of the bank are not in sync, according to Mr Mohamed.
"(But) there is definitely indication that CBK is a bit more lenient than it was earlier during the start of the current governor's term," he said.
Mohamed reckons that there is a good reason for CBK's current hands-off approach, which is unlike the razzmatazz with which Dr Patrick Njoroge announced his entry to the corner office of the apex bank in June 2015.
A slowing economy that has made it difficult for some financial institutions, especially small ones and microfinance banks, to mobilise deposits and borrowers to repay their loans might have informed CBK's decision to treat transgressors of capital adequacy and liquidity ratios with kids' gloves, according to Mohamed.
"But in this particular case it doesn't justify its (CBK's) position as a regulator to be laissez-faire yet bank customers are being affected," said the analyst.
A few months after Dr Njoroge was confirmed as the CBK governor, two banks, Dubai Bank and Imperial Bank of Kenya, folded up after breaching certain prudential guidelines.
That has not happened for a while. Instead, CBK has been quietly arranging for forced marriages of troubled lenders by larger, more capitalised banks.
This was the case with the acquisition of Fidelity Bank by SBM Bank; National Bank of Kenya by KCB; Jamii Bora by Co-operative Bank, and recently Equity Bank buying some assets of Spire Bank.
CBK would have easily done the same with First Community, which was also in the red.
Unfortunately, CBK did not know how to help First Community to easily tap into the liquidity facilities available to conventional banks, said Mohamed Wehliye, senior adviser to the Saudi Arabian Monetary Authority, in a tweet.
Mr Wehliye said Kenya does not have an alternative liquidity facility (ALF) that would have provided a level playing field and enabled greater flexibility for Islamic banks to meet their regulatory requirements, even as CBK played its role as a lender of last resort.
In his last post-MPC briefing, the CBK governor was dismissive when asked what he was going to do for the depositors of First Community.
"I cannot comment on that but all the banks that we are working with...in case of liquidity needs they have access to significant instruments both in the central bank and also in other places," said Dr Njoroge.
Some of these other instruments, he noted, include the interbank market or their own bilateral lines, where a bank can borrow or be given money by its parent company as happened with Bank of Africa.
"So I think the point here is all banks are working to, let's say, deal with any liquidity or, should we say, any of those challenges that may happen from one day to the next," said Njoroge.
CBK conducts checks on banks to ensure compliance on prudential guidelines on a quarterly basis.