Centum-owned Sidian Bank may be forced to pay more than Sh140 million in compensation to a coast-based financial services group for allegedly killing its table banking business that benefitted youth and women in the region.
Golden Services Organisation (GSO) sued the lender formerly known as K-Rep Bank, which it has been banking with since 2005.
GSO trustees Trifosa Jesse, Kang’alikya Maluki, Ibrahim Murithi and Paul Mungatia say the organisation would borrow money for working capital from the bank and has faithfully been repaying its loans for more than 10 years.
Ms Jesse explains that in November 2015 they applied for a Sh50 million loan, which they claim was duly approved by the bank and appropriate supplemental letters of offer executed in January 2016.
But the plaintiffs allege that without any reason and after nine months the bank reneged on the loan deal.
Further to that, GSO says it had already promised its clientele funds and made elaborate business plans and cash projections based on the anticipated capital injection.
“Upon this decline and material breach of the defendant’s undertaking and promise, my organisation got into a severe financial crisis, and for the first time since 2007 we were unable to service the existing facilities…The plaintiff prays for an order of immediate release of all title security documents as well as an order directing the bank to pay Sh140,539,563 being the value of lost income and business,” the woman said.
Sidian, however, says the loan was never approved. The bank also argues that it was not true that its CEO at the time had promised a partial disbursement of Sh5 million during a meeting at the bank's headquarters in Nairobi.
Ms Jesse claims that the bank besides declining the loan started all manner of intimidation and harassment by threatening to foreclose and send their names to Credit Reference Bureaus and recalled the full loans.
“The persistent lack of expedient cash and the delay disbursement to our clients caused extreme panic among the groups and it became impossible to make any collections totally killing the enterprise,” she said.
The woman say her organization started making losses in a business that was on upward trend for more than 11 years and that its accountants and auditors have projected a loss of earnings worth Sh140.5million for the period stretching to December 2021, directly attributable to the defendant’s actions.
She claims the bank was envious of the competing business it was posing and hence plotted to sabotage and kill the enterprise by tactically denying it funds, a condition that saw the enterprise continued to deteriorate for lack of cash and capital and operations became virtually impossible precipitating its closure.
Sidian has denied that it harassed GSO, with Mombasa Branch Manager Agnes Wanja saying the loan was not approved on the basis of the bank’s credit analysis of the customer’s loan book, noting that the customer was over geared.
"This means there was overreliance on external borrowed funds for onward lending rather than internally generated funds. The customer was therefore advised to first inject additional capital into the business before being considered for another loan," she said.
She said the bank considered the customer’s request for the said additional facilities but decided not to accommodate it and the decision communicated to the customer through the bank’s email and a subsequent letter.
The financial institution further explained that it could not release and discharge the new and old securities held by it to enable the customer seek loans elsewhere since GSO had not made any commitment to repay an outstanding loan amount of Sh15.9million.
“It was and remains illogical and imprudent to expect the bank to part with her securities without any pre-conditions as this would potentially expose the bank to the risk of a total or partial impairment of the facilities extended to the customer," the branch manager said in court documents.
Hearing of the case that is before Environment and Land Court Judge Anne Omollo continues on May 28.