The Lake Region Economic Bloc, comprising 14 western Kenyan counties, has proposed acquiring struggling Consolidated Bank with $28 million in regional funding, a plan met with skepticism from financial analysts.
The bloc’s chief executive, Abala Wanga, revealed the initiative aims to transform the state-owned bank into a development institution. Each county has allocated $2 million in their 2018/19 budgets to support the purchase, though the bank requires at least $35 million in capital to meet regulatory standards.
Consolidated Bank, incorporated in 1989, has faced persistent financial challenges, posting losses of $2.7 million in 2016 and $4.3 million in 2017. Its core capital ratio has been below statutory requirements for four years, prompting calls for a strategic investor. The National Treasury holds a 78% stake, with minority shareholders including NSSF and Co-operative Bank of Kenya.
Analysts question the feasibility of the acquisition, citing past failures to revitalize Tier-3 banks. A 2018 research paper by Standard Investment Bank highlighted struggles among buyers of similar institutions, referencing Mwalimu National Sacco’s $24 million 2015 purchase of Equatorial Commercial Bank, now Spire Bank.
The bloc’s development blueprint emphasizes regional financial inclusion, arguing a local bank would better serve lower-income populations. However, the proposal faces hurdles as Consolidated Bank remains in deficit, with losses totaling $4 million in the first nine months of 2018.
