Outrage amongst Family Bank clients’ over planned upward review of interest rates beginning April 1
The Family Bank of Kenya has sparked internal strife and fears of possible bank-run amongst its core clientele who have running bank facilities over planned upward review of interest rates on existing loans beginning next month, April 1, 2023.
According to bank correspondences in our possession, the lender is on a messaging spree notifying its clients of scheduled review of applicable interest rate.
“The interest rate charged on loans will be arrived at using the Family Bank Reference Rate (FBRR) currently at 12.71 per cent, plus a margin (currently a maximum of 5.67 per cent) per annum.” The notice by the banks to the clients reads in part.
However, when The Informer Media Group contacted Chief Executive Officer (CEO) Rebecca Mbithi for comment via mail, the bank said the issue has been brought to the attention of the relevant department.
“Good afternoon. Your email has been well received and brought to the attention of the relevant department who will get in touch with you to respond suitably to the subject. Thank you for contacting us. Kind Regards.” A mail response from the bank read in part.
Irate clients have termed the bank’s move as a unilateral decision which will impact negatively to their existing loan payable installments agreed between them and the bank.
“This is criminal; you cannot review the interest rate of existing loans upwards without consulting the client.” One of them who spoke on condition of anonymity lamented.
“We refer to your existing loan facilities with the bank and wish to notify you that, effective April 1, 2023, the bank will effect the Risk-Based Pricing Model to guide interest rates levied as approved by the Central Bank of Kenya.” The notice from the bank adds in part.
Family Bank is not new to controversy, in 2021, the parliamentary Public Accounts Committee (PAC) summoned the bank management led by CEO Mbithi and chairman of the bank’s board chairman Wilfred Kiboro in connection to a land fraud probe in which the government paid Sh135million for a title already charged at the bank.
However, at the time, the bank and their clients, Chosen Builders Investment Limited (CBIL) never made full disclosure of the status of the 50 acres of land title.
Consequently, the National Land Commission (NLC) paid CBIL, a private company linked to a controversial televangelist-cum-businessman David Kariuki Ngari alias Gakuyo Sh135, 470,000 for the same land through Family Bank.
The bank is being held liable for non-disclosure and withholding critical information in what is believed to be a well-orchestrated plot to defraud taxpayers.
The questionable transaction was hurriedly executed in 2018 while acquiring the land on behalf of the State department of Housing and Urban Development of the Ministry of Transport and Infrastructure for the construction of a landfill.
In what points to a clear corruption scheme, the commission paid CBIL Sh135, 470,000 and the title was not transferred to the government to date.
The said compensation money was paid through Family Bank.
Further, despite having received compensation of the 50-acre piece of land in Murang’a County through Family Bank, thereafter, the bank allowed Ngari to charge the same title, irregularly held by CBIL for a bank facility.
Effectively, the government has since been dispossessed the land it paid for.
Senior government officials including then and currently serving Housing Principal Secretary Charles Hinga, NLC officials, Family Bank senior managers and directors of CBIL were singled out as persons of interest in the investigation by the Parliamentary Public Accounts Committee (PAC) chaired by Ugunja legislator Opiyo Wandayi.
The committee on-boarded investigators from Assets Recovery Authority (ARA).
Our investigations further revealed the bank is also under parallel investigation by the anti-Banking Fraud Investigation Unit (BFIU) attached to the Directorate of Criminal Investigations over the same transaction.
The 50 acres are part of 300 known as Mitubiri/Wempa Block in Murang’a County, which is registered in the name of Chosen Builders Investment Limited whose director is Ngari, and has been charged as bank loan security at Family Bank.
The land commission paid Sh135 million two years ago for the parcel of land in question but did not obtain ownership documents.
The Ministry of Transport acquired the land for the construction of Murang’a Sanitary Landfill Project co-founded by the World Bank.
However, despite World Bank having already pumped in Sh700 million into the project, records indicate the venture is being done on a private land.
The project was meant to solve solid waste management challenges in Murang’a, Kiambu and Nairobi counties.
“This is a clear scheme that was agreed upon by Family Bank, NLC and Chosen Builders to swindle Kenyans off their money. This project is 80 per cent complete and the title is nowhere to be seen and the money is already with you. What is going on?” Wandayi posed.
He added: “As Family Bank, how did you extend this loan facility to this company if you had proper knowledge of the nature of business Chosen Builders is associated with?”
The Auditor General Nancy Gathungu also flagged the transaction in a special audit.
In a special audit on NLC’s payments on behalf of other government entities for the period 2014-15 to 2016-17, the Auditor General stated the parcel was still registered under Chosen Builders Investment despite the land having been fully paid for.
“NLC made an offer of award of Sh135, 470,000 to M/s. Chosen Builders Investments Ltd, vide a letter Ref: VAL 1506 dated 24 November, 2016 signed by Dr Salome Munubi, Director of Valuation and Taxation on behalf of NLC. The plot owner accepted the offer of award on 29 November, 2016,” Gathungu said.
“As at the time of special audit, NLC had paid M/s Chosen Builders Investment Ltd a total of Sh135, 470,000 in two instalments of Sh53, 000,000 paid on 20 April, 2017 while the final installments of Sh82, 470,000 was paid on January 12, 2018.”
