KTDA says it has recovered Sh1.7bn deposits from collapsed banks

The Kenya Tea Development Agency (KTDA) has recovered Sh1.7 billion from the collapsed Chase and Imperial banks, easing the blow on farmers who had banked Sh4.9 billion in the failed lenders.

KTDA, which is owned by tea factory companies, recovered Sh1.4 billion from Chase Bank last year and was paid Sh300 million from Imperial Bank shortly after it collapsed just over three years ago, the firm’s finance and strategy director, Benson Ngari, said in an interview.

With an agreement having been reached recently on the takeover of Imperial Bank by KCB Kenya, Mr Ngari said that 35 percent of the amount owed was expected to be released as soon as modalities of payment of depositors are finalised.

That means the tea farmers agency is expecting Sh910 million out of the outstanding amount of Sh2.6 billion.

Outstanding amounts

The agency has, however, provided for up to Sh3.1 billion in its financial statement in the event that outstanding amounts – totalling Sh4.3 billion as of June 2018 – are not paid.

KTDA’s financial statements showed that Sh1.4 billion from Chase Bank was paid in the course of the financial year July 2017 to June 2018.

KTDA Holdings manages the tea factory companies on behalf of farmers and is paid a management fee of 2.5 percent.

The company also guarantees the factories when they borrow loans and also negotiates rates for deposits with banks.

It has several subsidiaries dealing with various aspects of the tea business including logistics and value addition.

Review policies

The experience with the collapsed banks has forced the institution to review its banking policies such that its money is now mostly banked with tier-1 lenders, Mr Ngari said, even as he regretted the effect such a move would have on the liquidity of tier-2 and tier-3 banks that mostly lent cash to small and medium enterprises.

“We have changed our policies. We have reviewed the criteria of banking and so the bulk of our money is deposited with tier-1 institutions.

“That denies liquidity to many smaller banks which also has an effect on SMEs because we are among the largest agricultural firms and manufacturers with significant weekly deposits, but we don’t have much choice when we are dealing with farmers’ money,” said Mr Ngari.

At the time of the collapse of the two banks, the total amount held as deposits in the two institutions was nearly Sh4.9 billion with just over Sh2.9 billion held at Imperial Bank and about Sh1.9 billion held at Chase Bank.

This was, however, out of a total of over Sh30 billion held in various banks at the time. The collapsed banks had offered KTDA the highest deposit rates.

SOURCE: Business Daily