- European Investment Bank launches investigations into claims of accounting irregularities, weak lending practices.
Multilateral lender European Investment Bank is set to undertake its own investigations at Shelter Afrique to establish the financial health of the housing financier in the wake of allegations touching on accounting irregularities and weak lending practices.
The Luxembourg-based bank in 2014 lent Shelter Afrique €15 million (Sh1.65 billion) for onward lending to support affordable housing ventures, and is among the nearly one dozen multilateral financiers exposed to the troubled mortgage lender.
“The EIB takes all such allegations seriously and is currently working in close cooperation with the Shelter Afrique board on their investigation, as well as conducting our own independent review of the allegations which we expect to conclude in due course,” the European bank said in response to Business Daily queries.
These concerns over Shelter Afrique’s finances have already resulted in a downgrade on long-term debt outlook to Ba3 from Ba1 by ratings agency Moody’s.
A draft forensic report prepared by Deloitte also shows that French development agency Agence Française de Développement (AFD) wants to carry out its own forensic audit at Shelter Afrique.
AFD, with an exposure amounting to $27.85 million (Sh2.785 billion) at Shelter Afrique, was yet to respond to our queries by the time of going to press.
EIB’s euro-denominated facility to Shelter Afrique matures in the year 2020 and attracts an interest rate of 13.10 per cent per annum.
The European Union’s bank is acting following a leaked petition alleging dishing out of subprime mortgages resulting to 59 per cent of Shelter Afrique’s $246.3 million (Sh24.63 billion) loan book being non-performing as at February 2016.
The whistleblower report was authored by former head of finance Godfrey Waweru and circulated to the housing lender’s board of directors and financiers.
Shelter Afrique managing director James Mugerwa has been restructuring overdue loans by rescheduling such facilities to appear they are performing, thereby suppressing the volume of toxic mortgages, claims Mr Waweru.
Kenyan taxpayers control 10.63 per cent of Shelter Afrique, which is owned by a total of 44 African countries together with the African Development Bank (AfDB) and African Reinsurance.
Deloitte was in November last year hired at a cost of $52,000 (Sh5.2 million) in professional fees to probe the allegations made by Mr Waweru and was expected to complete the probe by December 8, 2016.
The deadline was later moved to Christmas Day but Shelter Afrique’s board of directors is yet to update on the progress of the in-depth audit.
The list of dud loans at Shelter Afrique include those advanced to Taj Mall, Translakes Estate in Kisumu, Eden Beach Resort in Shanzu, and Oakpark Properties’ Pine City in Athi River, according to the bank’s financial statements.
Other finance institutions who have extended lines of credit to Shelter Afrique are AfDB, Ghana International Bank, German Reconstruction Bank (KfW), Islamic Corporation for Development, Commerzbank, and Nairobi-based Commercial Bank of Africa.
In total, these lenders have advanced a total of $157.2 million to Shelter Afrique for onward lending to real estate projects as at December 2015, according to the financier’s latest annual report.
Shelter Afrique incurred $1.21 million in interest expenses in the year to December 2015 on these funds from financial institutions.