Connecting the Dots of the Cash Flow in Kenyan Banks: The hard questions

I believe in the adage, ‘ to each, unto his own.’ but the happenings of last week in the banking sector crashed my serene environment and thrust me into an environment of desperation and anxiety.

For a long time I have been wondering where do Kenyans get their money and most of the time, my friends would tell me, if you don’t have money, then it’s just you, don’t say kenyans don’t have money. It seems everyone else had found a tap to go collect money except me.

I am a Chaser and that’s a story for another day but the happenings at Chase opened a Pandora’s box that many, including the CBK had not anticipated.

The financial sector, especially the NSE has been suffering from an investor confidence from the 2007/08 PEV. Those concerned have tried to rebuild that confidence and they were on a path to recovery until Chase happened.

Now the entire financial segment at the NSE is under fire and suffering from a serious confidence debacle from investors.

Read: The State of Banking in Kenya: A Story of Numbers

Read: National Bank Poor Performance Attributable to Increased Loan Provisioning

This has contributed to the NSE confidence going back to zero. The talk about ease of credit for entrepreneurs and SMEs has taken a different dimension that is very worrying.

Have SMEs and entrepreneurs been the guinea pigs of raising resources for looting? The GOK starts a fund for youth entrepreneurs, appoints a bank as the distribution channel and the bank makes it impossible for the youth entrepreneurs to access the funds, as the bank loans the money to its employees at 3% and it’s directors. Then goes ahead and does a cooked up report as to how the youth entrepreneurs have failed to meet the basic requirements.

The second scenario is even worrying. A bank collects data on the entrepreneurship realm, meets foreign and local investors. Tells them the SME scene has the best returns. The bank gets KES 3B to lend to SMES. The media is entertained to run with the story. When the SME applies for the loan, the threshold is impossible to meet. The money is loaned to employees and directors.

Then the real questions start to emerge. Who supervises these banks when they have cash to loan out? What is CBK’s core mandate? Where is CMA in all these?

Imagine ‘borrowing’ 500M in KES at 3% to never be returned? What do you do with such an amount? You invest it in real estate where you put up a block of flats. Buy a couple of V8’s and V12’s. You connect some of your friends and more Prado’s Landcruiser are brought.

Tracking this money becomes hard because it’s already in the system. Real estate booms. Car importation keeps going up. Gadget and electronic business flourishes.

Initially we all thought the money sustaining the real estate and car importation was ‘piracy money’ but once piracy was put under control, these two sectors continued to flourish.

If one director could ‘invest’ 1 B in KES and ‘borrow’ 7B in KES that is pumped into real estate, then this offers a glimpse of exactly what’s happening.

The youth fund money. The women fund money. The NYS. The Uwezo fund money. When it’s lying there in the bank, who collects the interest?

Whose responsibility is it to honestly and dutifully track these funds?

Do you have a friend in the banking sector at the top senior and director level? What car are they driving? Where do they live?

Safaricom’s performance where they make billions sound like pocket change in profits has given banks the unnecessary pressure to ensure they deliver value for their shareholders. Best way to do this? Cook the numbers. Which m