How Mwalimu Sacco purchased majority shares in a dead bank

Mwalimu National SACCO signed an agreement on October 10th, 2014 to buy the banking and investment arm of ECB (Spire Bank). The SACCO then became the majority shareholder in ECB, having acquired a 75 per cent stake in the bank at the cost of Kshs. 2.6 billion, the Sacco is now desperately battling for the disposal of its banking unit by the end of March this year in efforts to cut endless losses they are incurring

By Our Investigative Team

One of Kenya’s leading Sacco, the giant Mwalimu with members drawn from all over the country is counting huge losses running into billions of shillings after the board ‘convinced members’ to approve the purchase of a dead Spire Bank. The deal was sealed more than ten years ago but it has come back to haunt the Sacco management, the board and worse of all tens of thousands of teachers from across the country.

It is now emerging that the management of the giant Saco has decided to jettison itself from Spire Bank by the end of March this year, but at whose loss and gain? How is the Sacco going to recover the billions of shillings that was sunk into a dead bank in such a blind excessively expensive deal?

The late Merali come to the limelight 10 years earlier, when he bought shares in the then financially ailing multi-billion shillings mobile telephone company Airtel, then known as Kencell and sold to Celtel in two hours, he walked away with a cool Ksh. 2 billion in profit

And why was there no due diligence conducted on the dead financial institution before they entered into any purchase deal? Why did Mwalimu Sacco’s top managers and the board fail to seek the authority of Sacco’s delegates before entering and consummating the deal?

Chief Executive Officer (CEO) Kenneth Odhiambo

The biggest irony of the whole business is the fact that Ministry of Education Principal Secretary, Dr Wilson Songa once said: “Kenyans are proud of Mwalimu National Sacco as a leading institution in the country and Africa in terms of Asset base and Turnover. This has come as a result of professional management of the Society by the current management. These results give us pride as a Ministry.” Does it, Dr Songa? 

Mwalimu Sacco has a membership of more than 57, 227 as at the end of the last financial year, the members are largely secondary school teachers and higher educational institutions. The top national management and board brass are led by the Chief Executive Officer (CEO) Kenneth Odhiambo, supported by Chief Managers Felix Saina, Patrick Oweke in charge of Finance, Patrick Oweke of the Procurements department, Arthur Mbugua Internal Audit and Risk Management among others, these are the men and women who are supposed to be answering the hard questions. Why is it that two personalities from the same community occupy the two top posts at the Sacco?

Mwalimu National SACCO signed an agreement on October 10th, 2014 to buy the banking and investment arm of ECB (Spire Bank). The SACCO then became the majority shareholder in ECB, having acquired a 75 per cent stake in the bank at the cost of Kshs. 2.6 billion. Emerging facts are that Mwalimu National Sacco is now desperately battling for the disposal of its banking unit, Spire Bank by the end of March this year because of the continuing endless losses they are incurring annually.


Mwalimu Sacco board ‘convinced members’ to approve the purchase of a dead Spire Bank

In a recent internal communique to members, a copy of which is in our possession, Sacco’s Chairman Ochieng says details of the Spire Bank disposal proposal will be cleared by the end of this year’s financial quarter as the teacher’s Sacco seeks to take the bank out of its hands by way of “sale of by liquidation”. Mr Ochieng went on to state: “The Sacco is currently engaging both regulators, the Central Bank of Kenya (CBK) and SASSRA as well as potential entities to take over Spire Bank completely off Mwalimu National’s ownership.” Ironically, both the CBK and SASSRA were not involved in the bank’s purchase by Sacco as required by law.

The late Naushad Noorali Merali sold a dead bank to teachers

He declared that the Mwalimu Sacco has not and will not inject any additional funds into the dead bank in terms of cash flow. “With regards to its recent deposits to capital conversion, the movie does not afford the bank a new lease of life but is rather a process allowing for the voluntary liquidation of the bank,” Ochieng declared. He went on: “The end game of the strategy is to take the bank off the Sacco’s hands by March 2022 so that Mwalimu National Sacco can focus on its core business of mobilising members’ savings and offering access to credit. It’s time for the Sacco to cut its losses emanating from the Spire bank venture and that must be done now.”

Internal confidential documents that have since gone public revealed the Sacco had converted deposits held in the bank to capital equivalent to more than Kshs.3.4 billion, moving the lender closer to meeting CBK statutory requirements but without the documented and ratified authority of the owners – the members during their delegates at the last year’s ADC held at the Bomas of Kenya.

At its apex both managerial and board of directors desperately hoped that the capital release is going to make the lender attractive to a potential buyer or investor in a dead duck thus conceding their folly right from the acquisition. It is widely known that Spire Bank has been majority-owned by Mwalimu National Sacco after its secret dramatic 2015 acquisition from the highly questionable billionaire businessman Naushad Merali. A man with a history of un-reputable acquisitions and deals from which he made easy money in questionable high-level corporate deals in the country and overseas.

Our researched background documents that in years following the purchase, the bank had been mired in annual loss-making sprees making it a repugnant untenable investment option for the teachers who are now keen to cut their losses without any possibility of ever recovering their lost billions of shillings. According to statistics from the CBK the bank has since gulped and drained off all its shareholder funds running into billions of shillings. That is after accumulating more than Kshs.9 billion in losses across the more than six years of the Mwalimu Sacco acquisition. During the signing of that fateful agreement, the local media widely reported that: “On one side of the table sat executives from Mwalimu National Sacco, the buyers of the bank. On the other side sat Mr Naushad Noorali Merali, a billionaire who has made his money buying and selling off struggling companies.”

Yet the country’s business history had already clearly documented that: “The billionaire Merali had come to the limelight 10 years earlier, when he bought shares in the then financially ailing multi-billion shillings mobile telephone company Airtel, then known as Kencell and sold to Celtel in two hours, Merali walked away with a cool Ksh. 2 billion in profit. 

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