Sportpesa 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]

Sportpesa and Law society of Kenya among the big names with billions in the bank

Gambling firm SportPesa, the Law Society of Kenya, Strathmore University and thousands of Chamas are some of the institutions whose billions have been locked in Chase Bank after it was shut down.

The betting company said the money locked in the bank is over Sh500 million but declined to give the exact figures.

“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 Saturday yesterday.

The company is one of the biggest betting companies in the country and is estimated to be amassing billions of shillings in betting money. 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.

On its part, Strathmore University has asked students not to deposit any money in its Chase Bank account in a bid to mitigate any further losses.

“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 in a short message service.

The university advised students to deposit money in its other accounts held at cooperative Bank and Standard Chartered Bank. It is not clear how much the university had in the bank but it could also run into hundreds of millions of shillings.

The institution is one of the Universities in the country that had opened up 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 one of the first institutions that came public after the mid-tier lender was placed under receivership.

LSK which has had two accounts in the bank regretted why it did not withdraw its money from the accounts held at bank and instead chose to believe the bank’s management that had denied any cash troubles.

“The Law Society of Kenya had taken the diligence of inquiring from Chase bank management who assured it that news of instability were alarmist,” LSK President Isaac Okero said in a statement. He did not pick our calls yesterday when we sought to find out how much was locked up but insiders estimate it to be more than Sh50million.LSK had both its investment and clients accounts held at the bank.

The LSK said that after it received confirmation from the lender that all was well, it stopped a special council meeting that had been convened to resolve to withdraw cash from the bank.

The bank also had established a big base of small investment groups, popularly known as Chamas, which banked with it on the promise of getting better loan terms.

It had also endeared itself to the Small and Medium sized enterprises, who constituted a big proportion of its client base, who are now suffering in silence after the bank was closed.

These are part of the 55,000 depositors at the bank that had sank more than Sh96 billion in the bank. Some of the affected victims have threatened to commit suicide, with others admitted in hospital due to shock.

About 1400 employees of the bank are also staring at losing their jobs if the bank does not survive its current crisis.

The bank was placed under receivership by the Central Bank of Kenya (CBK) on Thursday this week, for a period of 12 months, after it was unable to meet its obligations such as making payments and honouring transactions.

After news spread that the bank was in trouble, ‘lucky’ customers rushed in and withdrew Sh8billion 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 billions in toxic loans.

The CBK revealed that the lender had dished out Sh16.6billion to its directors and other entities owned by them in another case of reckless insider lending that has come to haunt Kenya’s banking sector.

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

Directors also gave themselves unsecured loans of Sh1 billion further worsening the non-performing loan portfolio of the lender.

What is worse, another Sh6.9billion was advanced to entities owned by directors raising the portfolio of dangerous loans to Sh16.6billion.

But CBK says that 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 and dented confidence of the bank is restored.