Finance

Finance (59)

BoU Made No Effort TO Rescue Crane Bank Despite Shs478bn Spend

Bank of Uganda (BoU) didn’t prepare a plan detailing efforts to return Crane Bank Limited (CBL) into compliance with prudential standards despite the central bank and regulator of the financial institutions injecting SHs478.8bn to support the operations of CBL, at a time BoU took over statutory management commercial bank that was started in 1995 by Dr. Sudhir Ruparelia.

This revelation is contained in a widely publicized report authored by the Auditor General. BusinessFocus reports that in a letter dated 28th November 2017, the Parliamentary Committee on Commissions, Statutory Authorities and State Enterprises (COSASE) requested the Auditor General, John F.S Muwanga to undertake a special audit on the closure of commercial banks by Bank of Uganda.

“During this period, the Statutory Manager did not prepare a plan detailing efforts to return the bank into compliance with prudential standards despite BOU injecting UGX.478.8bn to support the operations of CBL,” a leaked Auditor General report on seven defunct banks reveals.

“In absence of any documented assessment to revive the bank, I could not provide assurance as to whether Sections 89(5) and 90(a)(c) of the FIA (Financial Institutions Act) 2004 was complied with,” it adds.

Section 89 (5) of FIA states that “the Central Bank shall exercise statutory management over a financial institution for the minimum time necessary to bring the financial institution into compliance with prudential standards”, while Section 90 (a) (c) of the same act talks about the duties of the statutory manager, saying “..tracing and preserving all the property and assets of the institution… evaluating the capital structure and management of the institution and recommending to the Central Bank any restructuring or re-organization which he or she considers necessary and which, subject  to the provisions of any other written law, may be implemented by him  or her on behalf of the institution.”

Crane Bank was placed under statutory management from 20th October 2016 to 20th January 2017. After taking over Crane Bank, BoU appointed Edward Katimbo Mugwanya as the CLB Statutory Manager. Crane Bank is just among the many banks which have under unclear circumstances collapsed under the watch of the central bank.

Other banks include Teefe Bank, International Credit Bank Limited (ICBL), Greenland Bank, The Cooperative Bank, National Bank of Commerce (NBC) and Global Trust Bank (GTB).

The report reveals that the Statutory Manager prepared Crane Bank annual report and financial statements for the year ended 31st December 2016, but these were neither signed by BOU nor the Auditors.

“Furthermore, the Statutory Manager did not provide financial statements for the period January 2017 to 25th January 2017 (P&A completion date). I was therefore unable to ascertain the financial performance of CBL during statutory management and its financial position as at 25th January 2017. As such, I was also unable to establish the details and values of assets and liabilities transferred to DFCU,” says the report.

Report Pins BoU On Collapse, Sale Of Commercial Banks

A new audit report sactioned by Parliamentary Committee on Statutory Authorities and State Enterprise (COSASE) but conducted and compiled by the Auditor General (AG) office reveal that Bank of Uganda (BoU) id not follow the lawful procedures in the closure of Crane Bank and six other commercial banks.

The audit by COSASE was meant to guide a wider investigation the committee intends to carry out and understand circumstance under which seven commercial banks collapsed unceremoniously.

The affected banks include Crane Bank, Teefe Bank, International Credit Bank Ltd, Greenland Bank, The Co-operative Bank, National Bank of Commerce and Global Trust Bank.

On 28th November 2017, COSASE requested the Auditor General, John F.S Muwanga to undertake a special audit on the closure of commercial banks by Bank of Uganda.

The Auditor General report, according to media reports, has been handed over to COSASE. It indicates that BoU did not follow any guidelines/regulations or policies in the sale of Crane Bank to dfcu Bank last year and in the closure of the other banks.

“I observed that there were no guidelines/regulations or policies in place to guide the identification of the purchases of the defunct banks. There were also no guidelines to determine the procedures to be adopted by Central Bank in the sale/ transfer of assets and liabilities of the defunct banks to the identified purchaser,” the AG report reads in part.

The AG, Mr John Muwanga, also said the Central Bank did not carry out an evaluation of the assets and liabilities of Crane Bank before they were transferred to dfcu Bank.

“On April 10, 2018, I requested for P&A agreement, including details of the assets and liabilities transferred after taking into account the requisite valuation. I noted that BoU did not carry out a valuation of the assets and liabilities of CBL. In the absence of the valuation, I could not establish how the terms for the transfer of assets and liabilities in the P&A were determined,” Mr Muwanga’s report reads in part.

The AG’s report has also raised questions on how BoU signed a Purchase of Assets and Assumption of Liabilities agreement with Dfcu on January 25, 2017, for the purchase of Crane Bank.

“I was not provided with the negotiation minutes leading to the P&A agreement. In the absence of the minutes, I could not determine how BoU selected the best-evaluated bidder and how the terms in P& A were determined. I also noted that the P&A did not have complete details of assets and liabilities transferred to dfcu with their corresponding values; I was, therefore, unable to establish the status of assets and liabilities transferred to dfcu,” the report adds.

The AG has also questioned the source of Shs478.8b the Central Bank injected into Crane Bank in 2016 to keep it liquid.

 

Financial Inclusion: Wala Awarded 2018 Zambezi Prize

The Legatum Center for Development and Entrepreneurship at the Massachusetts Institute of Technology (MIT), with support from the Mastercard Foundation, has named South African startup Wala as the grand prize winner of the 2018 Zambezi Prize for Innovation in Financial Inclusion. The announcement came during the Open Mic Africa Summit in Nairobi on August 29th, 2018.

Wala is a mobile financial platform geared toward consumers operating outside the formal financial system. Using a blockchain system, it enables zero-fee, instant, borderless micro-payments for emerging market consumers. Through the Wala platform, users receive a cryptocurrency wallet and can access transactional banking, remittances, loans, and insurance.

Wala was chosen from among 10 finalists for the Zambezi Prize. All of them joined leaders from the MIT and African tech ecosystems for the2018 MIT Open Mic Africa Summit at Strathmore University in Nairobi. The Summit, featuring cohort-building, panel discussions, and MIT hackathon exercises, culminated in the announcement of Wala as the US$100,000 grand prize winner. Tulaa (Kenya) and RecyclePoints (Nigeria) each won US$30,000 as runners-up.

The seven remaining finalists won US$5,000 each. They are Apollo Agriculture (Kenya), Bidhaa Sasa (Kenya), FarmDrive (Kenya), Farmerline(Ghana), LanteOTC (South Africa), MaTontine (Senegal), and OZÉ  (Ghana).

An additional US$5,000 will be awarded to an African entrepreneur—to be named later this year—who has demonstrated great leadership in unifying Africa's tech ecosystem.

"Innovators like Wala and the other Zambezi finalists are vital to driving a more inclusive prosperity", said Georgina Campbell Flatter, the Executive Director of the MIT Legatum Center. "We're excited to work with them."

"We are immensely proud to support the Zambezi Prize," said Ann Miles, Director of Thought Leadership and Innovation at the Mastercard Foundation. "It shines a bright light on the creativity and talent of Africa's young people, and the thinking they bring to financial inclusion. This is making real differences in the lives of poor people on the continent."

All 10 Prize finalists will attend the Zambezi boot camp on the MIT campus during the MIT Inclusive Innovation Challenge (IIC) gala in Boston on November 5-9. As the Zambezi Prize winner, Wala also won the IIC Africa Prize in the Financial Inclusion category.

The startup will join the three other winners of the IIC Africa Prize, to represent Africa at the IIC global tournament which awards over $1 million in prizes. The IIC event is part of the MIT Initiative on the Digital Economy and, along with the MIT Legatum Center's initiatives, exemplifies MIT's global commitment to the future of work.

The Zambezi Prize and the Open Mic Africa tour are pillars of the Legatum Center's Africa Strategy – a global vision to leverage MIT's ecosystem to improve lives through principled entrepreneurial leadership. The Legatum Center's Africa strategy is also a core component of the MIT-Africa initiative which encompasses the Institute's global priority  for collaboration with the continent.

Ali Diallo, Global Programs Manager at the MIT Legatum Center, emphasized the scale of collaboration necessary to execute initiatives like Open Mic Africa and the Zambezi Prize.

"We're especially grateful to the Zambezi Prize Board, our global ecosystem collaborators, and the 40 African tech leaders who served as Zambezi judges and whose dedication to entrepreneurship and financial inclusion helped us discover this new generation of innovators". 

dfcu Profits Drop, Key Investor Restructures Ahead Of Exit

The year 2018 has been tumultuous for dfcu and it continues to be as we head into the last quarter of the calender year. From leading shareholders indicating they are quitting and pulling out their investment, now the commercial bank is making unprecedented profit drops.  

On Monday, Daily Monitor reported that dfcu has posted a profit drop of Shs72b for the year ended June 30 despite the bank claiming it’s ‘performance had normalised following the integration of the acquired assets of Crane Bank.’

The year 2018 has been a year unlike 2017 when the fortunes of Crane Bank played to dfcu’s advantage. Dfcu registered a profit of Shs41.3b in the year ended June 30 compared to Shs114b posted for the year ended December 31, 2017.

“The results show a profit after tax of Shs41.3b compared to Shs114.1b for the same period in 2017. The results for 2017 included a one off bargain purchase of Shs121.8b,” Daily Monitor quotes the bank.

Mr William Sekabembe, the dfcu executive director, at the weekend told Daily Monitor the bank would, in the next half year ending December 31, 2018, leverage on technology to boost customer experience.

However, the news papers writes that investments in the bank’s digital infrastructure along with the cost of repayment, ate into its profitability and increased its operating costs to Shs96b in the year ended June 30 up from Shs91b last year.

CDC Group Restructures

Meanwhile CDC Group which commands a 9.97 percent stake in dfcu recently appointed two new Non-Executive Directors, Dolika Banda and Andrew Alli, to the Board ahead of their planned exit from dfcu. 

CDC Chairman, Graham Wrigley, said the two will play an important role in bringing the voice of African business right into the heart of CDC’s governance  

It should be remembered that CDC Group early July wrote to dfcu informing them of their exit and withdrawal of their investment. CDC wrote to dfcu top management on 14 June outlaying their exit plans.

Irina Grigorenko, CDC’s Investment Director in charge of Financial Institutions, was quoted by various media outlets saying they are undertaking a review of its investment in dfcu Limited.

Grigorenko said review would likely lead to the disposal of some or all of its shares in dfcu over the short to medium term. “it is our aspiration to exit in a manner that causes minimum disruption to the business and ensures the orderly trading of dfcu’s shares.” Grigorenko said in her communication to dfcu.

 

Anti-Corruption Crusaders Protest Bagyenda FIA Appointment

A number of youth groups continue to pressurize Matia Kasaija, the Minister of Finance and Economic Development to drop embattled Justine Bagyenda, the former director supervision at Bank of Uganda, from the Board of Directors at the Financial Intelligence Authority (FIA).

In a letter addressed to the finance minister dated 17, August 2018, a youth group calling themselves Youth Anti-Corruption Crusaders, want Kasaija to change his mind and dump Bagyenda.

Youth Anti Corruption Crusaders is made of organizations like Youth power Research Uganda, Sauti Ya Vijana, Youth Crusaders and Uganda Power Youth Movement among others.  

The Financial Intelligence Authority is investigating Bagyenda for cases related to money laundering. Therefore, appointing her to the board of an institution investigating her, will jeopardize the investigations, the youth anti corruption crusaders say.

Bagyenda is also being investigated by Inspectorate General of Government (IGG) office for dubious accumulation of wealth. Early this year, a whistleblower petitioned the IGG claiming that Bagyenda has accumulated more than Shs19 billion within a space of two years. The money was allegedly saved in various local banks.

With all these investigations, Youth Anti-Corruption Crusaders believe appointing Bagyenda to a crucial institution entrusted with fighting corruption will be a move to frustrate investigations and the national fight against corruption.

They have therefore advised President Yoweri Museveni, the Chairperson of Appointments Committee of Parliament, Minister of Finance and Economic Development that the immediate suspension of the appointment serves the best interests of this nation.

“We don't need to remind our fellow countrymen that our dear nation has been crippled by corruption and people like Bagyenda should not elevated to rob this nation at the expense of the tax payers money,” Youth Anti-Corruption Crusaders said in a letter to finance minister.

Youth Anti-Corruption Crusaders notes that associating and appointing Bagyenda who is under investigation to FIA Board give government a bad face.

Finance Minister Matia Kasaija on August 9 revealed that he is ready to withdraw the nomination of Ms Justine Bagyenda to serve as a board member of the Financial Intelligence Authority (FIA) should Parliament decline to vet her on moral grounds being that, she is still under investigations.

However, despite Members of Parliament and various parliament committees contesting the minister’s nomination of Bagyenda, Kasaija has remained adamant and continues to stand with the former Bank of Uganda strongwoman who oversaw the collapse of Crane Bank and other commercial banks in the country while serving as director supervision at the central bank.

BoU: Non Performing Loans Drop, DFCU Liquidity Strong

The governor Bank of Uganda Emmanuel Tumusiime Mutebile reports that the financial performance of the banking industry in Uganda continues to strengthen as indicated in the end-June 2018 data.

“In particular, the ratio of non-performing loans to total loans in the banking industry reduced further from 5.3 percent at end March 2018 to 4.4 percent at end-June 2018,” Mutebile said.

He was speaking at the Uganda Bankers’ Association Informal Dinner which was heald at Golden Tulip Hotel, Nakasero on 27 July 2018 where he noted that the banking industry has strong capital and liquidity buffers, which provide a solid platform for expanding intermediation in the year ahead.

The governor said the banking industry’s cost to income ratio registered a measured reduction, while after tax return on assets rose marginally.

“We have now observed five consecutive quarters of improving financial performance among banks, driven primarily by stronger loan quality. As such, we can say that the rise of non-performing loans that hit the banking sector in 2016 has abated.

The governor also faulted the media for portraying dfcu Bank as a failing financial institution following news that their leading investors were quitting due to issues related to lack of corporate governance and numerous court cases the commercial bank faces following the take over of Crane Bank.

"dfcu Bank’s operations have progressed normally and the bank remains in a strong liquidity position," Mutebile said urging banks to demonstrates the need to build resilience to reputational risk by widening and deepening the moats (defences) for protecting public confidence in the banking system.

"The directors and management of financial institutions must prioritize reputational risk management, not least by developing proactive communications strategies with effective crisis control measures as well as the capacity to thwart fake news.

Youth Group Want Finance Minister To Apologize For Appointing Bagyenda To FIA Board

Youth Power Research of Uganda, a pressure group, has written to Parliament requesting that it stops the appointment of former Bank of Uganda director for supervision Justine Bagyenda from being appointed on the board of Financial Intelligence Authority (FIA) by the minister of finance Hon. Matia Kasaija.

Last week the media reported that Hon. Kasaija had reappointed Ms Bagyenda to the board of FIA yet the same agency is investigating her for matters related to misuse of office and leading to closure of several commercial banks in the country, the recent being Crane Bank.   

In the letter dated 23rd 07, 2018, and addressed to Hon. Abdu Katuntu, the chairman Committee on Commissions, Statutory Authorities and State Enterprises (COSASE), the youth group want parliament to prevail on Finance minister to revoke madam Justine Bagyenda FIA appointment. 

“We would like to request the COSASE committee to summon the minister of finance to explain the circumstance under which they appointed Ms Justine Bagyenda, a former director supervision Bank of Uganda who is under investigation by the same agency, Financial Intelligence Authority (FIA) and Inspectorate of Government for matters related to mismanagement or foul play which led to the dissolution of three banks in a short span of less than 6 months while still working in BoU which cost many of our youths their jobs and financial inclusion hence tampering with the growth of the economy.

 

We therefore appeal to COSASE to summon the finance ministry which is the line ministry to explain the circumstance under which led to appointment of a person to the board of an organization which is supposed to investigate her which can jeopardize fair findings of the comprehensive investigations report as a result of conflict of interest.

 

we appeal to COSASE committee to summon Hon. Matia Kasaija to apologize to investors on behalf of government for obstructing justice.” the reads in part.

Finance Minister Appoints Bagyenda On Board Of Authority Investigating Her

Finance minister Matia Kasaija re-appointed Justine Bagyenda to the board of the Financial Intelligence Authority (FIA) even as she is under investigation by the same Authority, something that riled Member of Parliament who questioned the move.

Bagyenda is also under a separate investigation by the Inspector General of Government (IGG) over allegations of illicit accumulation of wealth while a motion demanding that a Select Committee be set up to investigate the operations of Bank of Uganda and her role in the closure of Crane Bank is on the Order Paper, Daily Monitor reported.

the re-appointment of Ms Bagyenda has kicked up a storm with MPs questioning how FIA will conduct a comprehensive investigation when she is a member of its board.

Shadow Attorney General Wilfred Nuwagaba said the Appointments Committee should put on hold approving Ms Bagyenda until investigations by the IGG and the FIA are concluded.

“I hope sanity will prevail in the Appointments Committee to stay her vetting and approval pending clearance from the institutions investigating her,” Mr Nuwagaba said.

Buhweju County MP Francis Mwijukye, a member of the Appointments Committee, warned: “That is wrong. If they had wanted to re-appoint her to the Board, at least they should have waited for the outcome of the ongoing investigations. In my opinion, the appointment should be stayed until investigations into her conduct at Bank of Uganda are concluded.”

Ms Bagyenda will have to contend with questions regarding conflict of interest over how the FIA investigation into allegations of money laundering against her can proceed when she is a member of the Board.

Read Full Report HERE

Youth Group Demands For Bagyenda’s IGG Investigations Report

Youth Power Research Uganda, a pressure group advocating for social and economic transformation of youth, has asked the Inspector General of Government (IGG) to publish a report detailing investigation findings into a one Justine Bagyenda

The letter from Youth Power Research Uganda dated 12th July, 2018 has been received by IGG’s office, Office of the Prime Minister and that of Parliament’s  Committee on Commissions, Statutory Authorities and State Enterprises (COSASE). It is titled Refusal And/Or Delay To Publish Investigation Report Regarding One Justine Bagyenda. 

Bagyenda is under investigations and asset verification by the Leadership Code Directorate in the office of the IGG over illicit and under declared wealth plus accusations of money laundering by the Financial Intelligence Authority (FIA) over money laundering accusations.

On February 20, a whistleblower petitioned the IGG to investigate Bagyenda, referring to different assets, and the billions of shillings she allegedly had on her accounts. It is believed that her wealth doesnt match her salary as a department director at Bank of Uganda, the country’s central bank and regulator of the banking industry. 

However, it is now  months without producing the report a thing that has prompted the youth to pile pressure on the IGG.  It should also be noted that a section of members of public  allege  that IGG has blocked the of investigating Bagyenda because the two are friends. 

Zahid Sempala the head of publicity Youth Power Research Uganda said that the IGG had earlier written to them indicating that they were acting on behalf of a third party something they deny.

“Our requirement is on the purported illicit undeclared wealth of one Justine Bagyenda and the consequences thereof”. “We wish to clarify that contrary to your fears, we serve no untiring third parties save for self and country the constitution gives us the power.” 

“We wish to clarify that contrary to your fears we in fact serve no untiring third parties save for self and country the constitution gives us the powers to .We at once invited you to redeem our institution and similarly serve country and not individuals as appears to be the case”. reads part of the letter.

dfcu Find Themselves In Unenviable Situation

Just before the public got used to news that two top investors at dfcu bank could be leaving, reports of a liquidity crisis hitting them surfaced indicating that the commercial bank failed to secure loans from Bank of Uganda after hitting inter bank borrowing limit

It was reported that managing director Juma Kisami and the board of directors went to the central bank for a crisis meeting. Apparently dfcu requested the central bank to put a lien on the treasury bills and help them borrow money to enable them run business.  

“Unfortunately, they told us that they cannot allow us because we are already over exposed in the market. I tell you we have huge liquidity crisis,” an unnamed dfcu official was quoted by the media.

The interbank lending is a process in which banks extend loans to one another for a specified term. These loans are for maturities of one week or less. Matters at dfcu were not made any better by the resignation of Executive Director William Sekabembe.

Daily inspector, a local news website said Sekabembe’s resignation came as a result of dfcu’s failure to have a clear vision to move the banking sector to the next level. Sekabembe has reported got a new job at KCB Bank.

Another notable resignation at dfcu is that Arise BV Chief Executive Officer Deepak Malik who resigned from the dfcu board. Arise BV are the biggest shareholders in dfcu with almost 60 percent stake.

Troubles hit tipping point when the second biggest investors in dfcu, the CDC Group was quitting dfcu because of related corporate governance issues. Elly Karuhanga, the board chair of dfcu bank confirmed that CDC was leaving.

It is highly believed that CDC after realizing that the bank was headed for hard times and being threatened by court cases because of their involvement in the take over of Crane Bank, decided to exit dfcu.

CDC’s Investment Director in charge of Financial Institutions, Irina Grigorenko, said it was “undertaking a review of its investment in DFCU Limited which may lead to the disposal or some of some or all of its shares in DFCU over the short to medium term.”

Other report are indicating that CDC was against the idea of dfcu acquiring Crane Bank because of the flaws and illegalities surrounding its sell and takeover by the Central Bank of Uganda.

“CDC gave good advice to DFCU bank management saying it would still make profits like before without purchasing another bank but these guys went ahead with the deal and instead purchased problems,” a source at CDC is quoted.

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