Sacco to sell off the loss-making bank as leadership introduce a raft of risk mitigation measures
By Correspondent
Mwalimu National Savings and Credit Co-operative Society top management is toying with the idea of taking loss-making Spire Bank subsidiary off its books either through a sale or full liquidation, to stop any further losses the lender is exposing the Sacco to.
“In line with the delegates mandate passed on October 2nd, 2021, the Sacco is currently engaging both the Central Bank of Kenya and the Sacco Societies Regulatory Authority as well as potential entities to take over Spire Bank completely off Mwalimu National’s ownership,” said the Sacco’s Board Chairman John Ochieng in a communique to members, covering the first quarter of 2022 financial year.
He said that details of this transaction will become clearer by end of March 2022 when Sacco will have made a decision that has been elusive for a long while.
Apart from Spire Bank that has been underperforming, Mwalimu National also plans to divest from Mwalimu Assets Management, on whose books the Kisaju Project sits as well as other real estate investment projects including land.
“Our priority in the medium term and long term is to protect investments and assets of the Sacco through divesting from Mwalimu Assets Management Limited by completely offloading remaining properties to refocus the institution on its core business of lending. The board is in the process of disposing of the Kisaju houses and other real estates that are non-core to the Sacco’s operations,” said Ochieng.
Mwalimu National Sacco Management said it has taken measures to ensure that Spire Bank complies with CBK prudential requirements by reorganizing the lender’s current assets and liabilities and allowing the journey towards a full resolution to be concluded.
The Sacco is pursuing a structured liquidation strategy guided by SASRA and the CBK aimed at completely delinking Spire Bank operations and dependence on the Sacco.
“The strategy entails strategic re-organization of the bank’s assets and liabilities to restore it to solvency without a cash injection from the Sacco as has been erroneously reported by some media houses,” said Ochieng.
Deposits held by the bank are mere book balances not backed by liquid cash hence unrecoverable.
“This is to allow the current full resolution of voluntary liquidation of the bank to be concluded for it to move off the hands of the Sacco as per the resolution of the Special Delegates Meeting in October 2021,” said Ochieng.
The Sacco has insisted that Mwalimu National has not and will not inject any further funds into Spire Bank and that it is not affording the bank a new lease of life as has been widely misreported.
“The end game of the strategy, which is at an advanced stage, is to take the bank off the Sacco’s hands by March 2022. It is time for the Sacco to cut its losses emanating from the Spire Bank venture and that must be done now,” said Ochieng.
Available figures indicate that Membership of Mwalimu National grew from 104,544 to 106,602 currently despite the slow recruitment of new teachers. Members’ Deposits grew from KSh 41.42 Billion to KSh 44.36 Billion at end of December 2021.
Loan uptake, however, slowed down from KSh 38.07 Billion to KSh 37.86 Billion as members focused on survival arising from COVID-19 effects. Most were cautious, coupled with a lack of salary increments. But Ochieng said repayments on all loan facilities have since rebounded.
Mwalimu Sacco put in place measures to mitigate the negative effects of the COVID-19 pandemic on members.
“The Sacco introduced policy interventions including rescheduling, affording moratoriums in terms of loan repayment holidays on certain loan categories, besides introduction of new products such as Ufanisi, KMRC Mortgage Finance, and Asset Finance among others,” said Ochieng.
Towards the end of 2021, Mwalimu Sacco members were allowed to access advance against dividend, signaling Sacco’s solid cashflow position to meet members’ obligations as they fall due.
Mwalimu National turnover hit KSh 7.4 Billion at the end of January 2022 while the balance sheet size (asset base) of the Sacco reached KSh 60.85 Billion.
In 2021, the Sacco introduced a mortgage product by KMRC to assist members access housing. This is the lowest interest-bearing housing product in the market. The Sacco also introduced an insurance premium finance product to assist members to finance the payment of insurance premiums in partnership with MNS Insurance Brokers. Ufanisi was introduced to spur demand for members with low savings to get bigger loans depending on their ability.
In February 2021, Mwalimu National Sacco commissioned a new Core Banking System to take care of its big data and growing transactions. ” We continue to optimize the system’s capacity to deliver the expected results in terms of turnaround time and reduced downtime incidence that has inconvenienced our members on a few occasions,” said Ochieng
The Sacco took initiatives towards managing costs better to be more efficient and survive the effects of the COVID-19 pandemic. These include renegotiation of FOSA Branch rental costs in all branches countrywide, saving the Sacco millions of shillings besides rationalizing human capital and governance costs.
“The Sacco will embark on a review of its branches’ operational efficiency towards determination of leveraging new technology to deliver financial services to members. This means migrating our services, including loan applications and guaranteeing new member onboarding to an online platform,” said Ochieng.
