Rafiki caps withdrawals at Sh10,000 as depositors panic

A Chase Bank branch in Nairobi. The collapsed bank is Rafiki’s parent company. PHOTO | SALATON NJAU 

Rafiki Microfinance Bank has capped daily cash withdrawals at Sh10,000 as panicked customers sought their deposits following the placement of its parent company Chase Bank under receivership last Thursday.

The micro-lender continued to operate even as its parent firm collapsed due to failure to meet its financial obligations.

The receivership, the third in nine months, has triggered a panic among Rafiki accountholders who have reacted on the association between the two firms.

The Central Bank of Kenya (CBK), however, said Rafiki is operated and regulated separately and the action on Chase Bank does not affect the subsidiary.

“We are currently limiting withdrawals to Sh10,000 so as to allow our customers access to funds and adhere to the bank’s daily transaction limits,” Rafiki said on Friday in response to our queries.

The microfinance bank’s customers started queuing for their cash from Thursday morning when news of Chase Bank’s collapse spread.
Rafiki said that the limit would, however, be reviewed upwards as withdrawals reduce.

CBK on Thursday placed Chase Bank under receivership after it was established that the lender irregularly advanced Sh16.6 billion to various entities, many of them associated with insiders.

This has put billions of shillings belonging to its 55,000 depositors at risk. Chase Bank becomes the latest institution to go into receivership after Imperial Bank’s closure last October and Dubai Bank’s July shutdown.

CBK Governor Patrick Njoroge said the last straw that broke the camel’s back came in the form of a major cash crunch on Wednesday that rendered the bank incapable of meeting its obligations such as cheques or withdrawals that were due.

The CBK said, for instance, that one director lent himself a total of Sh7.9 billion, mostly without registered collateral and beyond the set regulatory limits.

The director lent himself more than the 25 per cent of the total capital limit set in the Banking Act. The actions of the director –whom the auditors called a significant shareholder– has now made it uncertain as to whether the more than Sh95 billion  deposits will be refundable to their owners who are mostly small and medium-sized enterprises (SMEs).