The National Assembly Committee on Finance and National Planning declined a petition by representatives of teachers asking Parliament to compel the Central Bank of Kenya (CBK) to give Spire the interest-free loan.
Teachers argued that the banking regulator had in the past given financial support to distressed lenders.
Mwalimu CEO Kenneth Odhiambo told MPs that Spire had unsuccessfully approached the CBK directly for funds, forcing them to seek Parliament’s help.
A parliamentary committee has rejected the push by teachers for a Sh2 billion State loan to Spire Bank, handing them the latest setback in their efforts to save the troubled lender from collapse.
The National Assembly Committee on Finance and National Planning declined a petition by representatives of teachers asking Parliament to compel the Central Bank of Kenya (CBK) to give Spire the interest-free loan.
Teachers argued that the banking regulator had in the past given financial support to distressed lenders.
“CBK was making efforts to support Spire Bank Limited in order to bring it back to profitability using other options so this prayer (Sh2 billion loan) fails,” the committee says in the report.
Teachers own the bank through their savings and credit union, Mwalimu National Sacco.
Mwalimu National Sacco
Mwalimu CEO Kenneth Odhiambo told MPs that Spire had unsuccessfully approached the CBK directly for funds, forcing them to seek Parliament’s help.
The CBK has been providing short-term liquidity of up to Sh1.3 billion through reverse repos (repurchase agreements), which is short-term and not enough to revive the bank.
Teachers have struggled to get a strategic buyer to inject much-needed capital into the bank, with suitors walking out at the last minute.
This comes after the Sacco Societies Regulatory Authority (Sasra) also stopped the teachers’ cooperative from pumping additional money into the bank.
The sacco has for years been supporting Spire with funds after the bank accumulated losses of Sh9 billion, including a Sh3.4 billion conversion of teachers’ deposits into equity.
Mwalimu has presented seven potential buyers to the CBK. The regulator informed MPs it was carefully engaging the potential investors while trying to balance the conflict of interest issues and ascertaining their credibility.
Spire has for the past eight years been grappling with losses that wiped out its core capital and shareholder funds, leaving it in breach of the CBK’s requirements.
The committee in its report tabled before the House last week declined the petition, saying that CBK is currently pursuing other ways to save the troubled bank.
Mwalimu wrote to Parliament early this month to have the CBK provide the loan it says is critical for averting the collapse of Spire.
“Long-term liquidity of Sh2 billion support as had been requested for by the bank in 2021 through the CBK. The loan should be interest-free in line with what had been offered to other financial institutions in similar or worse situations,” says the petition.
Asset base
Spire’s asset base dropped to Sh4.5 billion as at June last year from Sh13.8 billion in June 2016, while deposits dropped to Sh5.2 billion from Sh8.1 billion in a similar period.
Mwalimu’s acquisition will also be scrutinised for any foul play after the parliamentary committee directed the Ethics and Anti-Corruption Commission and the Directorate of Criminal Investigations to investigate the deal.
The bank’s core capital has since been eroded to negative Sh3.1 billion from Sh1.57 billion, highlighting the dire state of the lender that teachers have been struggling to sell.
