Bad news for tourism businesses with accounts at a bank put under statutory management in Kenya and Uganda

BANK CLOSURE IN KENYA IMPACTS ON TOURISM SECTOR TOO

(Posted 15th October 2015)

Someone within Imperial Bank, now under statutory management by the Central Bank of Kenya as well as the Bank of Uganda, was clearly not looking out for the clients’ interest, contrary to the slogan the bank marketers peddled to get business into their books.

Being put under Central Bank management and direct supervision is often the precursor for a bank closure though there have been rare cases that the respective banks have reopened, albeit with a massively shrunk clients base following the loss of trust and confidence.

While protection schemes are in place in both Uganda and Kenya will clients with current accounts not have access to their funds and their own liquidity and ability to pay bills and staff will be severely impacted.

From a recent visit to Malindi and Watamu it is clear that even tourism businesses are affected, hotels, resorts and fishing operations, leaving their management in a lurch of how to cope with the sudden lack of access to their cash reserves.

At least in two known cases have owners and managers therefore opted out of attending the ongoing Magical Kenya Travel Expo in person to deal with this crisis of confidence and lack of cash, showing how serious a matter it is when a bank slides into a financial quagmire and is unable to free itself from the often self made problems of overextending and holding non-performing loan portfolios for too long.

Best of luck to those affected and known to this correspondent to find a bridging solution until the respective Central Banks will permit the rescue fund operator to begin paying out some money, though there is a cap on it likely making businesses have to write off major sums.