Jamii Bora to get a boost from Co-op Bank after buyout

BySacco Review

Jul 23, 2020
Dr. Gideon Muriuki, Cooperative Bank Group CEO.

By Staff Reporter

Co-op Bank is set to pump more resources to the staggering Jamii Bora Bank as soon as it completes purchasing a controlling 90% stake in the small lender at a cost of Sh. 1 billion.

While responding to questions raised by the bank’s significant stakeholders Shorecup II, Conerstone, private equity firm catalyst and Nordic Microcap Investment, Jamii Bora CEO Timothy Kabiru disclosed the plans.

On 24th June 2020, concerned investors wrote to Kabiru asking him to affirm that the bank will be sufficiently funded for at least three years after its buy out by Co-op bank.

Their concerns come hot in the heels of multi-year losses that have extirpated Jamii Bora’s capital calling for urgent rescue.  

Responding to the stakeholders, Mr Kabiru said that it is the intentions of the boards of Jamii Bora Bank, Co-operative Bank and the Central Bank of Kenya to have Jamii Bora comply with all CBK prudential ratios as soon as possible.

However, Kabiru did not indicate the size of Co-op Bank’s potential boost. Co-op Bank will pay Sh1 billion for the 90 percent stake and it is not clear whether the extra capital will be provided in the form or debt or additional equity purchase.

“There is no doubt that the partnership with Co-op Bank will speed up this process and with management support, a capital injection, additional liquidity support, deposit growth and a return to profitability –Jamii Bora will return to compliance,” Said Kabiru while speaking to reporters.

Co-op rare financial support to Jamii Bora come after KCB’s heavy funding of National Bank of Kenya.  The country’s biggest bank acquired a 100% stake in NBK through a share swap and is investing a total of Sh8 billion in the subsidiary to bring it to compliance with critical capital ratios that it had breached for years.

In his letter to shareholders, Kabiru said that they have done a joint business plan that was developed by Co-op Bank and Jamii Bora in a bid to resurrect Jamii Bora capitally.

 “We do however have the Jamii Bora Bank strategic plan but due to the sensitive nature of the information contained in the document, shareholders are asked to make arrangements to send a formal request in writing to the chief executive officer, Jamii Bora Bank in order to be given the document,” said Mr Kabiru.

It is worth noting that Jamii Bora has not published its financial results for more than two years, having received an exemption from the Central Bank of Kenya (CBK) to facilitate its buyout.

Jamii Bora’s financial erosion can be traced to a number of factors including a defaulted Sh.412 million loan to Kenya Airways and a Sh500 million equity investment in Uchumi Supermarkets that has dropped to a current market value of Sh19 million.

The fate of the current Jamii Bora’s investors will immensely depend on the lender’s future performance under the control of Co-op Bank.

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