Kenya’s Central Bank has denied Fountain Enterprise Programme (FEP Holdings) a licence to run a deposit-taking microfinance bank, according to the Business Daily. FEP Holdings is local investment group with a large exposure in the financial services industry. In 2014, FEP was granted a temporary approval by the CBK to run the microfinance business as they awaited vetting to establish capital adequacy, ownership, and suitability of directors to run a banking business.
In a note to to its shareholders, the company says failure of CBK to give it a licence made them lose hope and turn the proposed micro-lender into an investment vehicle.
“Following notification from the regulator in March 2016 that our licence was not approved as anticipated due to a stricter regulatory environment, the board of Fountain Microfinance explored other options for the company,” John Kithaka, who is the CEO of the group.
The Business Daily says that it tried to get hold of Dr Kithaka for comments unfortunately he declined to reveal the reasons behind the licence denial. The Regulator had earlier asked FEP to clean up its shareholding list which included names of chamas that are not recognised as legal persons.
“The shareholders approved the transition of the company to Fountain Global Investors Plc. The shareholders further approved the change of the objects of the company from banking to carrying on the business of an investment company,” says the CEO in a memo.
On the flip side, the group has a five percent stake in a Kenyan Tier three Bank known Credit Bank, 60 per cent stake in mobile money platform MobiKash and in two others which it entirely owns; Fountain Credit Services and Nobel Insurance Agency.
CBK governor Patrick Njoroge refused to disclose reasons behind the regulator’s decision to deny FEP a microfinance banking licence despite granting an interim approval via a letter of no objection.
FEP had begun recruiting personnel for the proposed microfinance bank and incurred Sh25.5 million in staff costs last year from Sh1.8 million in 2014.
As at December 2015, Fountain Microfinance Bank more than doubled its losses to Sh42.9 million from Sh18.01 million a year earlier.
