Family Bank taken to task over audit report
National Assembly’s Public Investments Committee on Commercial Affairs and Energy has accused Family Bank over failure to recover Sh45.2 million advanced to entrepreneurs to set up information hubs across Kenya.
The committee met a team from the bank led by the chief executive Rebecca Mbithi and Information Communication Technology Authority CEO Stanley Kamanguya over outstanding balances of the Pasha Fund loan balances.
According to the Auditor-General’s report for Financial Years 2018/2019 to 2020/2021, the balance represents loans advanced to entrepreneurs to set up information hubs and was to be repaid within nine years.
“The balance is in arrears and there has been no collection during the year under review that is Financial Year 2018/2019, additionally, there has been no interest charged on the revolving fund balance even though the loan has remained unpaid for twelve months,” noted Pkosing.
Manage the funds
The legislators told the bank to explain how they were identified to manage the funds on behalf of beneficiaries after it entered into a contract on November 3, 2010 with the authority to provide funds to entrepreneurs to set up the hubs.
Pokot South Member of Parliament David Pkosing who chairs the committee said that the lender ought to have all the details about the money because the matter had been flagged by the office of the Auditor- General.
“The bank should be on top of the table, how were you identified, was it that somebody chose Family Bank so that they could eat this money? Was this contract designed for you for certain purposes? Now we have an audit query of Sh45 million. We believe that because of the integrity of the bank you need to tell us about this money,” he said.
He added: “Family Bank is a suspect for sinking Sh45 million, we need answers.”
Ganze MP Tungule Chanzo sought to know why despite Family Bank applying stringent rules regarding loans it did not find it necessary to apply the same when advancing the said loans to beneficiaries yet they were unsecured.
“It is the bank that interacts with beneficiaries, it is the bank which should know where these beneficiaries are. If the loans were unsecured what then enticed you,” he said.
Wajir West MP Farah Yussif took on the CEO for failing to provide adequate answers to questions posed by members.
The remarks by the MPs came after Mbithi said they did not have answers as to how the bank was identified, saying some of them were not in office when the loans were being given.
“We could not trace our documentation. As a bank we only keep records for a maximum of seven years after that we destroy them. I would also like to clarify that this is the first time we are interacting with the matter,” she said.
But on his part ICTA Kamanguya told the committee that the authority has written several letters to the lender over the same issue but have not yet gotten satisfactory letters.
ICTA, the successor of the Kenya Information and Communication Technology (KITCB) was mandated to provide funds obtained from the World Bank to Family Bank, which in turn was mandated to manage the funds under the Digital Village Revolving Fund (DVRF) Project.
“The authority has written to the bank seeking information on this matter, the last engagement with them is when I called the CEO personally. I would like to say that we are committed to this because we want closure on it,” he said.
Loan amount
Auditor-General Nancy Gathungu had flagged the long outstanding Pasha Loans, saying although the loans have remained outstanding for a long period and its recovery was doubtful, the ICT Authority management has not made an impairment provision for the loan amount.
She said interest chargeable on the loans was not included in the financial statements. “In the circumstances, the accuracy and completeness of the Pasha Fund balance of Sh45, 193,389 could not be confirmed,” Gathungu said.
