Auditor raises the red flag over Remu losses
Key Microfinance Bank acting chief executive Gregory Siro. FILE PHOTO | NMG
What you need to know:
- Key Microfinance Bank’s accumulating losses have put its ‘going concern’ status in jeopardy.
- The lender sunk deeper into a pretax loss of Sh42.44 million in the year ended last December from Sh24.87 million a year earlier.
- The tax credit, however, nearly tripled to Sh28.81 million from Sh7.46 million the year before, helping cut net losses to Sh13.63 million from Sh17.41 million in 2017.
Auditors of Key Microfinance Bank, formerly Remu, have cast doubts on the firm’s continued operations in the long-term due to recurring losses, unless it receives a fresh capital injection.
The microlender’s accumulating losses, the auditors warned, have put its ‘going concern’ status in jeopardy.
Accountants use the ‘going concern’ term to refer to a company which has sufficient resources to continue to operate indefinitely, thereby shrugging off any potential failure risks.
The small-sized microfinance bank sunk deeper into a pretax loss of Sh42.44 million in the year ended last December from Sh24.87 million a year earlier.
The tax credit, however, nearly tripled to Sh28.81 million from Sh7.46 million the year before, helping cut net losses to Sh13.63 million from Sh17.41 million in 2017.
“These conditions raise substantial doubt about the company’s ability to continue as a going concern unless there is continued financial support from directors, shareholders and related parties,” Mazars, the independent auditors, report in the annual report for 2018.
Rebranding
The deposit-taking microfinancier, which focuses on credit-needy micro and small-sized enterprises as well as individuals, started off as Remu in 2010 before rebranding into Key in February.
It announced during rebranding plans to raise Sh500 million in fresh capital from shareholders in next five years.
Key shareholders include private equity and fund manager Fusion Capital, which took a 25 per cent stake in 2014.
The lender’s bottom line in 2018 was largely hurt by provisions for loan impairments, which shot to Sh22.43 million from Sh5.34 million in 2017.
Loans in the period rose 6.31 percent to Sh231.46 million, while deposits went up 4.15 percent to Sh124.22 million.
Key is among 13 microfinance regulated by the Central Bank of Kenya (CBK).
Only four of the 13 returned a net profit in 2017, the CBK annual report shows. Profitable micro-lenders were Faulu whose net earnings was Sh143 million in 2017, Kenya Women Microfinance Bank (Sh19 million), U&I (Sh11 million) and Sumac (Sh5 million).
