Economy

Posta boss fights debt blacklisting in Sharia loan row

kinara

Postmaster-general Enock Kinara. PHOTO | SALATON NJAU

Postmaster-general Enock Kinara has moved to court to stop First Community Bank (FCB) from listing his construction firm as a defaulter with the Credit Reference Bureau and auctioning a piece of land it owns in Ongata Rongai.

Dr Kinara’s firm, Skycrapers Africaway, has sued the lender for putting up the land for sale after it failed to repay a Sh40 million loan taken to finance the construction of a five-storey apartment block on the property.

The firm says the loan was to be repaid through proceeds from the building, which collapsed midway through construction.

Skycrapers adds that FCB loaned it the money through Sharia law’s Musharaka financing system which requires a lender and borrower to share profit and losses from an investment built by borrowed cash.

FCB had provided 66 per cent of the project cost hence Dr Kinara’s firm wants it to take responsibility for losses of the same proportion.

Skycrappers has enjoined Amaco Insurance in the suit for allegedly refusing to compensate him for the building collapse despite having taken a policy with the underwriter.

“The bank explained to me that under the Musharaka financing should there be losses, each party would incur the loss to the extent of the contribution made. Amaco has intentionally refused to issue the assessor’s report or compensate Skycrapers and it has now been seven months since the collapse,” Skycrapers says.

FCB, however, insists that the loan was to be repaid within nine months, and that there was no clause in the agreement that profits and losses would be shared in a 66:34 ratio as Dr Kinara holds.

This, the bank says, is informed by the fact that Dr Kinara’s firm was granted a normal loans and a sharia compliant product. The lender further denies that the loan repayment was to be pegged on proceeds of the building.

Benjamin Maosa, FCB’s senior finance manager, adds that Amaco Insurance’s delay in compensating Dr Kinara’s firm cannot be used as ground to deny the lender its right to recover the loan.

“The collapse of the structure did not frustrate the financing agreement since repayment of the amount due was not tied to either completion or pre-sales, but repayment was to be monthly.

‘‘Skycrapers has in the meantime admitted that it is unable to service the loan and having made such an admission, the bank has a right to proceed and recover its finances from the security,” Mr Maosa says.

Skycrapers said that it offered to reorganise its loan repayment by proposing a Sh4 million deposit to FCB and monthly instalments of Sh200,000. But the lender says Dr Kinara’s firm failed to make the proposed deposit.

The lender adds that Sh200,000 per month would not make a significant impact on the debt it is owed.

Dr Kinara in his affidavit says that listing his firm with the CRB as a defaulter will curtail plans to have another bank take over his loan with FCB and finance a new project.
FCB however holds that it is bound by the law to report any defaulter with the CRB.

“The duty of a bank to forward the name (the CRB) stems from provisions of the Banking Act and the same arising in case of default which is admitted in this instance and the bank is therefore obligated to discharge that duty for the benefit of other lenders,” Mr Maosa adds.

Justice Fred Ochieng will mention the matter on June 6.