The Central Bank confirmed this week that it has assumed temporary management of Kingdom Bank Africa Limited (KBAL), an offshore investment bank based in Botswana, which trades locally as Kingdom Bank. The bank also has particular emphasis on providing superlative trade finance services as well as treasury services.
According to the Central Bank, Kingdom Bank’s former parent bank, Afrasia Holdings Zimbabwe Limited and the current major shareholder, Brotherhood Holdings Limited, are Zimbabwe-based entities. Head of Communications at Bank of Botswana, Andrew Sesinyi said Friday that during temporary management of the bank its operations will only be restricted to receiving repayments of loans and advances made to customers only.
“No deposits or withdrawals will be permitted during this period and Kingdom Bank cannot extend any new loans,” said Sesinyi in a brief statement on Friday.
Although the central bank has not stated the period of temporary management, it has since revealed that it does not envisage the set up to have any financial impact on domestic savers or on the domestic banking system as a whole. Privately-owned Banks operating in Botswana are licensed by the Bank of Botswana according to provisions in the Banking Act (Cap 46:04, section 4). The temporary set up at Kingdom Bank follows another setback that the bank suffered in 2012 when its subsidiary, Kingdom Finance was forced to scale down its operations and as a result, retrench staff. The subsidiary was offering purchase-order financing, invoice discounting, project financing and guarantees. Banking industry insiders says Kingdom Finance’s model was based on the understanding that being the largest consumer of services and products in the country, the Botswana government would participate in these transactions. However, Kingdom Finance later learnt that it did not qualify because it was an offshore bank.
“Dealing directly with clients has proved to be problematic because the default rate is usually high and the recovery process is too burdensome and cumbersome to deal with”, a banker told Sunday Standard on Friday.