A court battle has lifted the lid on some Sh. 4 billion in bad loans that HF (formerly known as Housing Finance) has been keeping secret.
This is contained in a suit filed by Former Housing Finance Company(HFC) director Kevin Isika. Mr. Isika says that high-ranking executives have over the years colluded to hide a massive Sh. 4.3 billion bad loans mountain, offering shareholders and regulators a false financial position.
The former director of credit claims in court filings that Housing Finance Group managing director Frank Ireri and his HFC counterpart, Sam Waweru, engineered his sacking after he raised questions about the risk that such a huge and hidden bad loans book posed to the company.
Mr Isika claims that Mr Waweru and Mr Ireri have ensured that the mortgage lender’s bad loans are reported as Sh5 billion, rather than the actual Sh9.3 billion.
The two executives, Mr Isika says, have been thwarting attempts to recover or list the hidden bad loans in HFC’s books.
“The bank has been reporting a non-performing loans figure of Sh5 billion. However, the real position is that non-performing loans are Sh9.3 billion, almost double the published amounts. This information was notified to the managing director (Mr Waweru) and the group managing director (Mr Ireri) via several emails starting from December 2015,” Mr Isika says in correspondences filed in court.
The suit papers further claim that a select group of Housing Finance employees have been exploiting a loophole in the bank’s system to exempt some borrowers from interest on loans taken, in return for kickbacks.
Mr Isika says that as head of credit, he investigated and found that the bank lost more than Sh200 million in the interest-exemption scam but that the actual figure could be significantly higher.
HFC has, in a response to the suit claims, dismissed the claim insisting that the matter had been investigated and resolved, and that Mr Isika never raised the issue of non-performing loans in bi-monthly meetings chaired by Mr Waweru.
The bank says in its response that it was only after Mr Isika was laid off that he wrote to the HF Group board of directors detailing his version of the goings-on at the bank.
This report was first published in the Business Daily.
