Former Jamii Bora CEO sues the bank for Sh112 million

• The bank replaced Ms Mbue in July last year and sources familiar with the dispute say she is seeking damages for a four-year contract allegedly terminated midstream.
• Details of the suit are laid out in the bank’s information memorandum guiding its rights issue—which is opening on Monday and aims to raise Sh519.9 million to boost its capital base and fund the lenders expansion.
• Ms Mbue’s claim is equivalent to 87.8 per cent of Jamii Bora’s total operating income in the half year ended June of Sh127 million, making it the biggest legal exposure for the micro-lender.

Jamii Bora Bank’s former CEO Minnie Mbue is seeking Sh112 million from the lender for alleged unfair dismissal.

The bank replaced Ms Mbue in July last year and sources familiar with the dispute say she is seeking damages for a four-year contract allegedly terminated midstream.

An executive at the bank who cannot be named since the matter is before court says she was replaced after failing to agree on strategy with the board and the slow pace at turning around the then loss making bank. 

Details of the suit are laid out in the bank’s information memorandum guiding its rights issue—which is opening on Monday and aims to raise Sh519.9 million to boost its capital base and fund the lenders expansion.

READ: Jamii Bora opens Sh500m cash call to shareholders

Ms Mbue’s claim is equivalent to 87.8 per cent of Jamii Bora’s total operating income in the half year ended June of Sh127 million, making it the biggest legal exposure for the micro-lender.

“Ms Mbue is basing her arguments on her four-year tenure being terminated prematurely,” said the executive who sought anonymity.

“The bank’s counterargument is that it has the right to terminate the contract in certain circumstances. It is for the courts to decide whether the bank was right in its decision,” added the source.

The bank had been making losses since 2005 and brought in new shareholders in 2008 to shore up its eroded capital base and sharpen its competitive edge in the face of growing competition in the banking sector.

It made a loss of Sh37.8 million last year compared to a loss of Sh84 million in 2010 even as other banks reported double digit growth in profits.

Last year, Kenya’s banking industry reported a profit of Sh89.5 billion compared to Sh74.3 billion a year earlier.

In December, the bank hired a former KCB Group deputy chief executive officer Samuel Kimani as its new CEO and Mr Timothy Kabiru, formerly retail director at KCB, as executive director, and has sold a significant stake to a consortium of investors to help it move to the profit zone.

The changes have started to bear fruit as Jamii Bora returned a profit Sh18.5 million in the six months to June compared to a loss of Sh37.8 million last year.

But it ran without a substantive CEO for five months following the exit of Ms Mbue as its operations were manned by the lender’s chief operations manager.

The bank—which had a single Central Bank approved deposit taking branch in December—is looking for new customers to feed its growing network. It currently operates 10 branches with four others to be opened by end of the year.