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County microfinance bank on death bed

NEWS
By Phares Mutembei | October 25th 2018

Members of the County Assembly are looking into the operations of a financial institution that is on the verge of collapse.

The Meru Microfinance Bank was started by former Governor Peter Munya (now Cabinet secretary for Trade, Industrialisation and Co-operatives) to provide youths, women and traders with funds to undertake various income-generating activities.

At the time, Mr Munya argued that it was a good initiative because it advanced loans at lowinterest rates compared to commercial banks.

But on Tuesday, the county assembly’s Public Accounts Committee (PAC) revealed millions of shillings could be lost because borrowers were not repaying loans.

The large number of defaulters meant that the microfinance had collected only Sh4.1 million against an outstanding balance of Sh47 million.

It also emerged that demand notices issued had already expired, putting the bank’s lending capacity in peril.

Committee chairman Kimathi Ithibua, who presented the audit report in a session chaired by Speaker Joseph Kaberia, said the bank’s board chairperson was paid Sh30,000 while other board members earned Sh20,000 in allowances, which went against the Salaries and Remuneration Commission's (SRC) guidelines.

Through a circular, SRC recommends an allowance of Sh15,000 for the chairperson and Sh10,000 for other board members.

Remuneration levels

The MCAs said Article 230(4) of the Constitution empowered the SRC to set remuneration levels as well as benefits for all State officers working for the national and county governments.

The report, which covered the 2016-2017 financial year, showed there was an over-payment of Sh850,000 to the board members.

Also questionable was expenditure of Sh4,821,778 for stationery, printing services and office supplies.

The ward representatives said they had not been provided with documentary evidence justifying the expenses.

Another unresolved issue, according to the report, was an over-payment of Sh84,150 in house allowances for four employees, which also went against SRC guidelines. The report recommended that steps be taken to recover the money.

Ward reps Patrick Karinga, Martin Makasi and Elias Murega said the microfinance institution was not effectively discharging its mandate.

“This report shows the microfinance has become a cash cow. It has been receiving funds every year. We are asking why it should continue to exist if it does not have money to give to deserving customers. I will not support giving any more money to it,” said Mr Makasi.

Mr Karinga said, "The microfinance corporation has become directionless. I will table a motion to wind it up because the money we are allocating to them is not being managed properly."

Mr Murega asked Governor Kiraitu Murungi to guide the county assembly on whether there was any reason to keep funding the institution given the amount of money that was unaccounted for.  

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