Sh10B Loss For Teachers as Equity Gets Acquisation of Mwalimu Sacco’s Spire Bank
Mwalimu Sacco, a teachers’ savings and credit cooperative, has left Spire Bank after nearly a decade of losses.
All of the deposits and loans in Spire Bank’s 10 branches were passed to Equity Bank Kenya on Tuesday following a deal approved by the Treasury.
Mwalimu Sacco chairman Joel Gachari said that the Sacco was not fully aware of the challenges when it acquired a 75% stake in Spire Bank, mostly looking at future prospects.
CEO Kenneth Odhiambo stated that the Sacco has learned to make better decisions for the interest of its members.
The accumulated losses of the bank reached about Sh10 billion when Equity agreed to the deal, which Equity Group CEO James Mwangi referred to as a “transaction of empathy.”
Spire Bank’s chairman William Rahedi opened up about the struggles the bank faced to keep its doors open, including difficulty accessing overnight borrowing from other banks and difficult moments for staff to convince customers not to withdraw their deposits.
The exit of Mwalimu from Spire Bank is part of the Sacco’s plan to shed off loss-making ventures, including Kisaju houses and two parcels of land in Juja, as well as the asset management unit.
Mwalimu Sacco rebranded the lender to Spire Bank in 2016, but now it exits the stage, having lost the inspiration to hold onto a dream that was birthed 40 years ago.
Mwalimu Sacco chairman Joel Gachari believes that while the Sacco could have done better in scanning the challenges, it was also partly unlucky as it acquired the controlling stake in Equatorial Commercial Bank in 2015 and then banks were hit with interest rate cap laws the following year.
The rate cap impacted the level of interest rate income the Sacco had projected, and Naushad Merali, who the Sacco disclosed earlier withdrew his deposits worth Sh1.7 billion in 2016, served to set the Sacco on a slippery path.
The exit from Spire Bank is an opportunity for the Sacco to free up its finances to concentrate on its traditional business, as well as grow newly launched products including mortgage loans and assets and insurance premium financing.
The Sacco was not fully aware of the challenges when it acquired a stake in Spire Bank, but has learned to make better decisions for the interest of its members.
The acquisition of Spire Bank by Equity Group is structured as an asset purchase transaction, which means that Equity Group will take over the assets and liabilities of the bank, rather than injecting new funds.
The payment for the acquisition will be determined by the difference between the assets and liabilities, which means that Spire Bank has no value and the teachers who invested in the bank have lost billions of shillings.
Although this acquisition will compound the losses incurred by the teachers, it is considered to be the best solution in a difficult situation.
The Central Bank of Kenya (CBK) is looking to protect the integrity of the financial market by allowing strong banks to acquire struggling ones, rather than letting weak banks fail.
This process helps to protect the interests of depositors, customers, and investors in the sector.
However, it is crucial that all parties involved in the acquisition process ensure that the workers and teachers who own the bank do not end up suffering further losses.
This situation highlights the importance of due diligence in any acquisition, as well as the need to carefully consider the potential consequences before investing in a company.
The acquisition of Spire Bank by Equity Group stands as an example of a trend in the financial sector, where large banks are acquiring struggling banks to protect the interests of the customers and investors.
This trend shows the importance of strong and stable financial institutions in ensuring the stability of the financial market.
Sh10B Loss For Teachers as Equity Gets Acquisation of Mwalimu Sacco’s Spire Bank
