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Gideon Muriuki

Advisers used by Co-operative Bank of Kenya to handle its ill-fated 2009 acquisition of Jamii Bora Bank were prevented from carrying out the full due diligence work that they were originally hired to do, financial analysts says.

A leading financial expert in the country, told media in a statement that, a combined decision by the regulator Central Bank of Kenya (CBK) and political influence from senior members of retired President Uhuru Kenyatta’s government paved way for the purchase of the country’s lowest-rated bank in a ‘disastrous’ purchase.

In a silent warning, leading banking experts and officials note that scrutiny of the deal did not extend to assessing Jamii Bora’s corporate lending portfolio – which later proved the bank’s undoing.

Instead, an assessment of that part of the low-rank bank business was left to the Co-op itself.

Earlier it emerged that former’s corporate loan book had deteriorated to such an extent that it was the main cause of a more that Sh1.5 billion capital black hole discovered at the Co-op Bank after purchase and takeover.

Many in the banking industry note that the exposure might in the long run hit the operations of Kingdom Bank, a company that came from the amalgamation of Cooperative Bank and Jamii Bora.

“One of the issues the mid-tier banks have is scale. We can do a lot on costs – and we’ve done a lot on costs and will continue to be focused on that – but you can’t keep cutting costs, you need to generate more income. This is a mid-tier bank with a Sh-100,000 million balance sheet and a combination if it happened, would not create a challenger with the order- so not that dissimilar to Mayfair Bank.”

More mergers and acquisitions among the smaller Kenyan banks would be a continuation of a process that began seven years ago and which, as evidenced by the takeover by CBA Bank of NIC Bank to create NCBA and the creation of Kingdom Bank after the Coop-Jamii Bora merger.

Co-op Bank itself is no stranger to takeover approaches from financial buyers. However, CBK later clarified that its due diligence mandate was originally meant to encompass the whole of Jamii Bora – but was later restricted. KPMG and other institutions charged with due diligence did not explain why the poor due diligence was overlooked allowing for the creation of a new entity from what was CEO Gideon Muriuki’s original business entity, Kingdom Securities that even employed Nairobi Securities Exchange CEO Edward Odundo.

KPMG was not involved in the deal to buy Jamii Bora bank, a senior official at the company said. The same was confirmed by Coop Bank management.

Co-op Group declined to comment, saying that an ongoing review being conducted by a former civil servant, would be examining such issues. This revelation about the due diligence came as MPs gave a roasting to advisers used by the Co-operative Bank for its Jamii Bora deal.

The KPMG at the same time denied they worked on the transaction.

Shareholders said there had been “an enormous amount of writing on the wall”, warning that a deal of this kind was being struck at an unwise moment, given ongoing turbulence in the financial markets. Paul Muturia and other shareholders accused the bank of pursuing a deal because of their fee structure.

“Your fee structure is hard-wired to get a transaction,” Muturia said in a statement.

A senior Coop bank official admitted “demonstrably we didn’t get it right” but denied that he and his colleagues were motivated to do the wrong thing.

It might be “thoroughly sensible” to make a portion of a fee dependent on the success of a deal, rather than merely on its happening, he conceded, although he said it might be difficult to structure such an arrangement fairly.

He said he was “100 per cent confident” in the integrity of his own advice not being influenced by the promise of a fee.

Coop Bank has been fighting one accusation after another. From steamy sex scandals, the nepotism, to officially tribalising the top echelons and mounting customer complaints, they stand in the eye of any storm that engulfs the banking industry that is dominated by one community in the Kenya kaleidoscope.

As a deal to buy into non-performing Jamii Bora Bank gained pace, analysts were worried about due diligence done by Cooperative Bank which had in the past been hit by cases of fraud perpetrated by bank employees who work in cahoots with external persons to obtain money from the bank.

The bank was on the spot as having weaknesses in its IT systems, which was attributed to sources within the bank.

Co-operative Bank has in the past reported erratic systems of poor quality and that explains for instance the constant system hitches.

“The former bank chairman’s sons are said to have supplied IT systems to the bank. The same family have also been rumoured to be supplying and tendering with the bank,” says a former employee, sacked in 2017.

The downtime attributed to a technical fault left the bank’s ATM Services, Card transactions at Merchants and other Point of Sale outlets dysfunctional rendering transactions by its customers impossible.

The bank, then announced having moved almost 90 percent of its customer transactions to alternative delivery channels including mobile and ATMs, has 580 ATMs and over 11,000 Co-op kwa Jirani agents across the country and the number is set to increase with the opening of new ATM machines and branches in Northern and Eastern Kenya.

Malfunctioning systems have been reported on December 22, 2017 and the worst would be on July 22, 2014 when the systems failed leaving numerous customers stranded with all manner of complaints.

On the Jamii Bora Bank purchase, which is as good as done, financial analysts are wondering why a behemoth like Coop Bank with a big financial muscle can go for a bank that survive by ‘the Grace of God’.

Jamii Bora Bank had in the entire period of its existence remained stagnated, refusing to innovate and introduce any change in the banking industry.

The transaction required regulatory approval from the CBK, Capital Markets Authority and the Competition Authority of Kenya and in the tribal oligarchy and corruption perpetrated by Cooperative Bank management ensured that it was easy for CBK boss to give the nod at first sight of the application.

The Nairobi Securities Exchange-listed Co-op Bank commenced operations in 1965 and had the fourth highest market share (9.63 percent) in the banking industry at the end of last year.

In contrast, Jamii Bora, started in 2010 after the acquisition by City Finance Bank, and had a market share of 0.12 percent, putting it at position 38 out of 39 banks.

The deal will lead to changes in market share as well as expansion of Cooperative Bank branches.

Jamii Bora’s last published financials are for the first quarter of 2018 when it had assets worth Sh12.5 billion.

Its liquidity ratio was in negative 11.1 percent compared with CBK’s minimum of 20 percent as at end of March 2018, leaving it in liquidity deficiency of 31.1 percent.

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Kenya’s Co-operative Bank may have lost around 18,000 customers in the first half of 2022-23, following a plethora of accusations and poor publicity precipitated by its own internal poor controls and alleged corruption.

A banking insider told reporters he regarded the loss of any customer as a “irreparable damage” but argued the numbers leaving were not as bad as might have been expected, given the negative publicity that has hounded the bank.

“When you consider what the bank has gone through I don’t think it’s a bad outcome, but I certainly don’t want to appear, or nor am I, complacent about it,” the banker said.

The recent move, by some members of the Kenya Military, Police and Prisons services follows the varying charges on the RTGS. This, compared to the rest of the players, gives the bank hefty profits for a service offered freely by industry players,” says an insider with knowledge of the goings on.

“In most cases, when an employee is paid his or her salary, it is expected that the transfer is done free of charge. But, in the case of Cooperative Bank, they charge an amount, which is its right meaning is theft or rip-off. The bank is simply stealing from millions of its customers and you can imagine the money they collect at the end of the month,” says a member of the Armed Forces, Mwangi Daniel.

The customer loss was revealed on after the bank reported a narrower profit for the first six months of 2022-23.

Hot on the heels of a case of the bank charging Sh42 for alert messages, a case in Migori County where the bank unleashed auctioneers on a customer and case where a dead client.

In January social media influencer Pius Kinuthia reported that a family in Mogori sued the bank for damages, something that took the social media community by storm leading to the affected family suffering irreparable losses.

The move to sue the Migori branch manager invited a public outcry but as usual, the bank’s PR Department responded with hubris and condescending messages.

In another case, a customer accused the bank of deducting money from the mother’s account while the elederly customer was criticalluy ill in hospital.

Coop Bank, in their usual reply template, said in a message signed off by FN: “Hello, please DM the account holder details incluing the account number, mobile number and the date they visited Maua branch so we may do a follow up.”

A customer Edwin Ochieng said that money was educted from his account without his knowledge.

The bank was left fighting for its survival after a massive capital shortfall was exposed in June last year following a failed bid to buy of branches from loss making Jamii Bora Bank one of the worst performing financial institutions in the country.

Jamii Bora was rescued when investors including Saccos and farmers agreed to a recapitalisation which meant Co-op Group went from outright owner to holding just a small percent stake.

The bank’s problems were exacerbated when current Managing Director and CEO Gideon Muriuki was named in many cases and innuendos touching on his ownership of land and other property, including a case on his private life that generated lurid headlines in Kenyan social media platforms.

The negative publicity likely resulted in some customers becoming disillusioned with the bank, which had built its reputation around ethical credentials such as not investing in weapons, tobacco and alcohol manufacturers.

Despite that, insiders say Co-op Bank attracted nearly 10,000 new customers during the period, leaving it with a net loss of 28,199 current or checking account holders, equivalent to nearly 2 percent of the total.

Kenyans are often reluctant to move between banks because of the perceived difficulties involved, although new rules that guarantee the paperwork will be completed within seven working days have lifted the number switching.

Kenya’s third-biggest lender reported a pretax profit of more than Sh11 billion compared with a slight change over the same period the previous year, though banking insiders attribute the figures to massaging of the accounts.

“It is not rosy at the bank. Things have not been good and the net effect is that the management, using position and influence in the industry can make the figures glossy as they can be. Afterall, it is a private entity, only regulated by the Central Bank of Kenya,” says an insider.

Co-op Bank also said its core Tier 1 capital ratio, a key measure of financial strength, stood at 11.5 percent at the end of June and was expected to be significantly above the previous guidance of 10 percent at the end of 2020.

The bank raised an additional Sh400 million from investors in May after its Tier 1 ratio slipped to 7.2 percent, dangerously close to the 7 percent absolute minimum required by the financial regulator.

“A large proportion of our cost is in people and, consequently, we will continue to see job reductions. There have been one or two redundancy programmes and I believe there will be one or two more in that respect,” he said.

An independent review commissioned by the bank, published in April, concluded that the root of the bank’s problems lay in its 2009 takeover of the Jamii Bora Bank and poor management controls.

On the other end, it is claimed in many places that the bank made a hefty donation to the Kenya Kwanza campaign during the last General Elections in which William Ruto floored ODM leader an Azimio Presidential candidate Raila Odinga.

During the last days of the campaign run, Coop Bank CEO Muriuki is alleged to have visited the Hustler Campaign headquarters with a donation of Sh200 million, though some people quote a different figure.

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Gidjoy Investment Operations Manager has failed to explain to court why the incident report of an attack on their property in Donholm says the report was made at Savanna base and not Buruburu police station as he alleged.

Mark Munge testified during examination in chief that after receiving a call from his head of security informing him that they were under attack, he called Buruburu police station and told the guard to do the same.

Giving his testimony before Principal Magistrate Gibert Shikwe, Munge testified that he called the OCS Buruburu and reported the matter.

“On 27th March 2018, he received a call from Dickson Nyairo, the security in charge saying that they were being attacked by Patrobas (one of the accused persons) and his group. I told him to call the police,” said Munge.

Munge testified that he recorded his statement on the same day at 5 PM.

The defense lawyer also pointed out that the crime and incident report also shows it was reported at 10.30 AM and not 8AM as the manager claimed.

The court heard that the manager has worked for the land selling company since 2012 and had been authorised by one of the directors, Gideon Muriuki, the CEO Cooperative Bank of Kenya, to testify on behalf of the company.

Munge said that he received the call at about 7.45 and visited the property at 9 am.


According to the witness, when he got there, he went inside the said land together with the guards and found that about 100 meters of the wall had been destroyed.


“We had a fence of wooden poles and wires around the 7 acre land. The damage was valued at about Sh 144,000,” Munge testified.

The court further heard that the land has been subdivided into 36 parcels.

In the case, 10 Sawesava group members are charged with malicious damage of a perimeter wall belonging to Gidjoy.


The accused perons are Benita Alando Nailanel, Peter Keya Owino, David Mutuku Makau, Kennedy Odhiambo Alex, Titus Ochieng Okoth, Boniface Oduor Anyiego, Calvince Ochieng Ooko, Patrobas Awino (group secretary), Nick Omondi Owango and Philemon Otieno are charged with malicious damage of the said fence.

Sowesava Self-help group and Gidjoy Investment have been in logger heads over the ownership of the said land.

Both parties claim to possess title deed as proof of ownership.

The High Court ordered the parties not to interfere with the said land until the hearing and determination of the case.

Munge also testified that the property had been invaded before, about three days before the March 27 attack where again the fence was damaged.

“About three days before, on 24th March 2018 we were attacked again by unknown people,” the witness added.

In addition, the court was told that the witness was named as the victim of the offence and not Gidjoy Investment, a company associated with Muriuki and wife Joyce.

Questioned on which plots the fence was damaged, the witness said he was not sure of the same.

During cross-examination by the sixth accused who did not have legal representation, the court heard that the Operations Manager had nothing to prove that the wall was erect the day before the alleged damage.

The court further heard that the Manager did not know who attacked them on 24th March yet is indicated in the charge sheet that it was the accused persons.

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Shareholders of Jamii Bora Bank have unanimously approved Co-operative Bank’s offer to acquire 90% of the bank. This is pursuant to an Extra Ordinary General Meeting held on 1st July 2020.

This will be through the subscription of 224,153,154 new class of Ordinary Shares that would enable Co-op Bank inject Kshs.1 Billion and appoint a Board to run the business.

The Co-operative Bank Group is one of the largest banks in the region with an asset base of over Kshs.470 billion, predominantly owned by the over 15 million member Kenya Co-operative movement.

Jamii Bora Bank is a fully-fledged Commercial Bank, licensed and regulated by the Central Bank of Kenya, with over 444,000 customers in 17 branches and employs over 190 staff. The Bank has a strategic niche in MSME banking, offering working capital and trade finance solutions.

The next steps will now be the regulatory approvals notably from Central Bank of Kenya, Capital Markets Authority and the Competition Authority of Kenya.

According to Co-op Bank’s CEO Gideon Muriuki, the strategic entry of Co-op Bank coming in as a 90% strategic owner is an “Inclusive Growth Model” that particularly safeguards the existing shareholders of Jamii Bora; in that they will now share in the expected future Transformation gains/profitability growth.

The deal now awaits regulatory approval from Central Bank of Kenya (CBK), Competition Authority of Kenya and the Capital Markets Authority. CBK had in March welcomed the talks saying the deal would enhance stability in the banking sector.

Co-op bank’s growth strategy has been more focused on expanding in Kenya as opposed to expanding beyond boarders. Outside Kenya, the lender owns 51 percent stake in Co-op bank South Sudan.

With over 440,000 customers and 17 branches, Jamii Bora is a value-add to Co-op Bank, with minimal overlaps and large upside potential for exploration of deeper banking relationships by Co-op Bank.

Co-op Bank has in the past indicated that upon acquisition, Jamii Bora may become the new platform for Co-op Bank to offer specialized business lines such as youth and women banking, asset finance and leasing.

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Morgan Stanley Capital International ( MSCI), one of the world’s biggest index compilers, has added Co-operative Bank of Kenya into its Frontiers Index Small Cap Index.

The index lists, what are regarded as blue-chip listed stocks from selected frontier markets of Asia, Middle East, Central and Eastern Europe and Africa.

Inclusion in the index raises the visibility of a listed company among prospective investors seeking opportunity in frontier markets.

Kenya was the only African country with companies on the index after firms in Morocco, Burkina Faso and Mauritius were “deleted”, according to a notice from MSCI.

The MSCI Frontier Markets Indexes include large, mid-sized, capitalisation companies and provide a broad representation of the equity opportunity set while taking investment requirements into consideration within each mars.

MSCI classifies 32 countries as Frontier Markets, 23 of which are included in the MSCI Frontier Markets Index.

For over 40 years, MSCI has provided global investors with research-based tools and services that include indexes, data, analytical models, regulatory reporting and research to help investors get deeper insights.

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