Nearly all borrowers of the collapsed Dubai Bank have stopped repaying their loans, painting a bleak picture for large depositors who are banking on loan recoveries to receive their monies.
With 99 per cent of Dubai Bank’s loan book non-performing, the Kenya Deposit Insurance Corporation says it will take court action on the defaulters, seize their assets, and report them to credit listing bureaus.
Loans to politically connected borrowers including former YK ‘92 chairman Cyrus Jirongo account for a third of Dubai Bank’s Sh4.4 billion loan book as at the time of the lender’s downfall on August 14, 2015.
“The bank holds some collaterals that are to be realised beside other recovery efforts, where proceeds therefrom shall be distributed to the depositors,” said KDIC acting chief executive Mohamud Ahmed Mohamud in an interview.
“We have commenced recovery efforts and in cases where there are no securities we shall pursue the legal process. Further details of all defaulters have been forwarded to the credit reference bureaus,” he said.
The deposit protection agency is currently liquidating Dubai Bank after the High Court last month threw out a petition seeking to stop closure of the lender.
Revelations of Dubai Bank’s mountain of bad loans comes as three directors of the lender — Hassan Zubeidi, Wilson Hassan Nandwa and Ali Bashir Sheikh — were on Monday charged with a second case of money laundering and conspiracy to defraud Bank of Africa.
The Central Bank of Kenya closed Dubai Bank citing “violations of banking laws and regulations, including failure to maintain adequate capital and liquidity ratios as well as provisions for non-performing loans and weak corporate governance structures.”
Audit firm Crowe Horwath East Africa in May told MPS that dubious lending worth Sh1.3 billion to a dozen firms associated with Moi-era powerbrokers was responsible for the sinking of Dubai Bank.
The troubled lender’s ratio of sour loans was 62.5 per cent as at December 2015, the auditors told the National Assembly, saying the well-connected pseudo-businessmen accounted for three-quarters of Dubai Bank’s toxic loans.
Most of these were unsecured loans and overdrafts, said Cephas Osoro, a partner at Crowe Horwath in a brief to lawmakers.
Mr Jirongo’s Sololo Outlets has a Sh103.2 million loan at Dubai Bank, according to documents tabled in Parliament.
Former Nakuru branch Kanu chairman Geoffrey Asanyo has a Sh412.6 million loan through his firm Kwanza Estates Ltd while Savannah Cement chairman Benson Ndeta took a Sh62 million credit line via Dantes Peak Ltd.
Others include real estate developer Daniel Rono of Maestro Properties with Sh69.9 million loan, Tasneem Khan of Winston International (Sh43 million), Ketema Abebe, Zap Group (Sh889 million), Kuza Farms and Allied (Sh249 million) and Torino Enterprises Ltd (Sh138.9 million).
Dubai Bank had customer deposits worth Sh1.36 billion at the time it was closed.
The deposit underwriter had paid out a total of Sh47 million to 760 depositors to a maximum of Sh100,000 out of Dubai Bank’s 7,743 accounts. The agency had planned to pay Sh123 million but mystery surrounds the true identity of the troubled lender’s account holders.
Dubai Bank has been engulfed in drama in recent years, with some of its troubles including managing director Binay Dutta fleeing the country early last year to avoid prosecution in a dodgy share sale deal worth $544,900 (Sh54.4 million.)
The bank’s chairman Hassan Zubeidi’s is in court facing allegations of obtaining Kenyan citizenship and academic qualifications through fraud.
Dubai Bank has also been accused in court papers of hosting a secret bank account used to loot Sh1 billion from Mumias Sugar.