Two MPs on Wednesday sensationally accused Treasury of giving Sh3.8 billion to three banks to lend out at high interest rates, yet the money was meant for soft loans to small traders.
The claims by Industrialisation assistant minister Ndiritu Muriithi and Kinangop MP David Ngugi were immediately dismissed by Finance ministry, which said that each bank had been given Sh250 million, bringing the total to Sh750 million.
Another Treasury official said banks are supposed to make available in loans five times the amount, meaning they would have been able to lend a total of Sh3.8 billion.
Mr Ndiritu and Mr Ngugi claimed that Sh3.8 billion from public coffers intended for lending to small traders at minimal interest was being lent to everyone at high interest.
They said they had gone public after unsuccessfully raising it with officials. “We have raised the issue with the Permanent Secretary (Finance), the Finance Minister, and even higher, but people whom we have repeatedly sat with have chosen to stick to such a discredited route when they should be providing long-term credit to Kenyans in production enterprises,” Mr Ndiritu said.
Mr Ndiritui said: “With every avenue of persuasion having been shut by some people in government, who appear to want this strange scheme to continue, we have decided to bring it to the court of public opinion.” They claimed that Cooperative Bank, Equity Bank and K-Rep bank were given the money at six per cent by Treasury and were now lending it out at between 16 and 18 per cent.
“We are of the view that something is terribly wrong. We do not see the rationale to take taxpayers money and lend to commercial banks at 6 per cent, Mr Ndiritu said.
But Treasury said that Sh750 million was given to the banks after successful bidding, and was meant to raise the kitty, which is supposed to serve as a revolving fund, to Sh3.8 billion.
Finance Minister Uhuru Kenyatta’s spokesman, Mr Munyori Buku, while dismissing the allegations, said that each bank received Sh250 million under an agreement that they would give five shillings for each they received.
“It was done openly with a view that the kitty will rise to Sh3.8 billion,” he said.
During the press conference at Parliament Buildings, Mr Ndiritu said: “The three banks are working with a cartel in government in a scheme that defeats every known economic logic.
This scheme is repugnant, shameful and immoral and what we have here is just a tip of the iceberg,” he said.
Cooperative Bank’s chief manager in charge of marketing and public relations, Mr Ngumo Kahiga, said the bank was awaiting Sh250 million from Treasury, which it will disburse to the target group.
“I can confirm that Co-operative Bank is waiting to receive and disburse money that will be lent to us from the Treasury. The amount is Sh250 million. The terms of the agreement are that for every shilling that Treasury has provided, Co-operative Bank lends five shillings of its own funds.
“The contract clearly states that the entire credit risk lies with the bank and the entire amount lent to the bank by Treasury will be refunded in total. The money is not a women’s fund. It is targeted at Micro and Small Enterprises.”
He said the Treasury and banks involved signed the deal at a public function on March 14.
At K-Rep Bank, the Nation was told that the public relations manager was in a long meeting.
Calls to Equity were not picked by its staff. The two banks could therefore not confirm that they are participating in the loan deal or received any money from Treasury.