KDIC to send debt collectors after clients of collapsed banks

The Kenya Deposit Insurance Corporation (KDIC) is looking for debt collectors to help it recover outstanding money loaned by collapsed commercial banks.

The institution charged with insuring customer deposits with commercial banks said Tuesday it had turned to the debt collectors in a new strategy to net defaulters conveniently instead of using lengthier legal avenues.

“We are looking for professional debt collectors,” KDIC chief executive Mohamud Ahmed told the Business Daily.

“(Their role) is to support us with institutions in liquidation that we have had difficulties to trace and pursue the debtors as an alternative to pursuing them through other channels. We have had them before and recorded success particularly with rural debtors”

As at June 30, 2018, KDIC had recovered Sh10.12 billion debts and other assets by institutions so far placed in liquidation.

This represented an increase of Sh193.7 million against the Sh9.92 billion it recovered in the previous financial year.

The total recovery included interest earned on Treasury Bills.

“General performance on debt recovery continues to decrease due to deterioration of asset quality,” said the agency in an annual regulatory filing.

“However, efforts of debt recovery have been enhanced by engaging various debt recovery firms as well as embracing alternative dispute resolution mechanisms to recover debts for the institutions in liquidation.”

It said as at June 2018, 13 institutions out of 25 managed to recover margins above 20 percent of the outstanding debt portfolio from the date of liquidation reflecting challenges with debt collection.

The most recent lenders to be placed under receivership are Chase Bank (which has since reopened), Imperial Bank that is still under KDIC management and Dubai Bank.

Dubai Bank is currently under liquidation. Others include Postbank Credit, Trade Bank, Middle Africa Finance, Pan-African Bank, Pan-African Credit and Finance, Thabiti Finance and Kenya Finance Bank.

Ari Bank Corporation, Prudential Bank, Reliance Bank, Fortune Finance, Euro Bank and Prudential Building Society are among other collapsed financial institutions.