Category: Business Daily

Electricity producer KenGen has been permitted to proceed with a Sh2.5 billion tender for the sale of 6.38 million carbon credits after the procurement watchdog dismissed an application by a losing bidder.

The Public Procurement Administrative Review Board (PPARB) dismissed an application for review filed by Sintmond Group Ltd, saying that given the magnitude of the subject tender and the substantial financial value involved, the firm bore the obligation to demonstrate its capacity to undertake a contract of such a scale.

Carbon credits, also known as carbon offsets, are permits that allow owners to emit a certain amount of carbon dioxide or other greenhouse gases.

Sintmond’s bid for the sale of Certified Emissions Reductions was disqualified after failing to provide independent evidence of successful performance in previous contracts of comparable value and complexity, despite being allowed to do so.

‘Accordingly, we find that under this ground, the Respondent (KenGen) was justified in concluding that the Applicant (Sintmond Group Ltd) lacked the requisite experience and capacity to handle the present tender.

Sintmond Group had submitted the highest bid offering $23,207,359 (about Sh2.99 billion).

The board said the omission contravened the requirements of Clause 14 of the bid data sheet, which obligated tenderers to demonstrate capacity and reliability through verifiable past performance.

The review board said the absence of such references reasonably made KenGen conclude that the company lacked the demonstrated capability to execute a contract of the magnitude contemplated under the tender.

The electricity-generating firm said Sintmond Group Ltd did not demonstrate any prior experience or capacity to manage a contract of similar magnitude, and when considered against the backdrop of the earlier terminated tender, the firm’s performance history did not inspire confidence in its ability to deliver.

‘Accordingly, we are persuaded that a reasonable and prudent procuring entity, faced with the same set of facts, would have reached a similar conclusion that the Applicant failed to demonstrate sufficient ability/capability to perform the tender,’ the board said.

KenGen advertised the bids in May, asking bidders to demonstrate previous successful participation in emission reduction trading or transactions of CERs or Voluntary Emission Reductions, which would form part of the evaluation criteria.

Three tenders were received- Munja Trading Limited in a Joint Venture with Marwil Energy Holding AS, Kyoto Network Limited, and Sintmond Group Limited.

Upon conclusion of the evaluation stage, the tender committee found the joint venture responsive.

The evaluation committee determined that Munja Trading Limited, in a joint venture with Marwil Energy Holding AS, had submitted the highest evaluated tender price, cumulatively amounting to $19,637,758 (2.53 billion), and was therefore ranked as the best evaluated bidder.

Sintmond Group challenged the decision, arguing that the procuring entity improperly relied on extraneous and undisclosed due diligence criteria to disqualify it from the tender.

Last month, the board had directed KenGen to do the bidding process afresh, citing irregularities in the earlier process.

The electricity-generating firm did as directed and settled on the same company, forcing Sintmond Group to file another application for review.

The firm complained that it was condemned unheard, and KenGen relied on matters that were never part of the tender process, in breach of the Fair Administrative Action Act.

And after hearing the case, the board still dismissed the application, stating that despite being aware of the importance of demonstrating past experience, the firm still failed to furnish the evidence.

‘The only reasonable inference to draw from this omission is that the Applicant did not possess credible proof of past performance to support its capability to execute the tender,’ said the board.

The High Court has sided with a German multinational engineering firm caught in a Sh1.9billion fight with Kenya Revenue Authority (KRA) over a delayed tax relief document.

The court said it was improper for the taxman to punish HP Gauff Ingenieure GmbH and Co. KG for administrative lapses in processing a tax exemption certificate.

While setting aside KRA’s decision to deny HP Gauff VAT relief of Sh526,022,967-a decision previously upheld by the Tax Appeals Tribunal-the High Court found that the Treasury Cabinet Secretary had failed to act on the firm’s request for a tax exemption certificate. It was, therefore, unjust to penalise the company for a government administrative omission.

‘It is my finding that the tribunal erred in allowing the administrative failure of the relevant ministries and the respondent (KRA) to prejudice the appellant’s (HP Gauff’s) established right to remission, effectively punishing the appellant for the government’s failure to finalise internal procedures,’ said the High Court in a ruling handed on October 23, 2025.

HP Gauff Ingenieure GmbH and Co. KG, which provides consultancy and engineering services mainly in the infrastructure sector, moved to the Tax Appeals Tribunal on August 21, 2020, after the KRA declined to grant it tax relief on projects funded by official donors.

The four main projects that are subject to the audit include the Kisumu-Kakamega Road, Merille-Marsabit Road, MRTS Jogoo corridor, and Nakuru Loruk-Marich road.

Under Kenya’s framework, Official Aid-Funded Programmes (OAFPs) may be approved by the Treasury Cabinet Secretary to exempt such projects from the 16 percent VAT, as a sweetener to attract cheaper loans from development finance institutions such as the World Bank and the African Development Bank.

Sufficient time

The KRA argued it rejected HP Gauff’s request for VAT relief-amounting to Sh526,022,967-because the firm failed to produce the requisite tax exemption certificates despite being given sufficient time.

The taxman also demanded corporate income tax of Sh1.24 billion, noting that the income earned from the projects was not exempt. It also demanded that the German firm pay-as-you-earn (PAYE) of Sh189,339,257, bringing the total tax claim to about Sh1.9 billion.

On corporate income tax and PAYE, the court faulted the tribunal for not addressing the issues that the German firm had raised, including challenging KRA’s decision to tax income from a water supply project located in South Sudan.

The firm also disputed KRA’s benchmarking of expatriate pay as well as its decision to reject its tax-free subsistence allowances.

The taxman said benchmarking was warranted because the reported salaries seemed low and the company failed to provide contracts for the foreign employees.

The taxman added that the firm did not qualify as a ‘regional office’ under the Income Tax Act, so the rule allowing regional directors and expatriates to exclude one-third of their pay from taxation did not apply.

However, the court noted that the tribunal ‘made no findings on these material questions’.

‘It did not refer to the evidence presented, such as the Shared Services Agreement or the Transfer Pricing Policy. It did not interpret the relevant sections of the Income Tax Act,’ the court said, while setting aside the decision to uphold the assessment on corporate income tax and Paye, sending it back for a fresh hearing.

‘Instead, it upheld the entirety of the Sh1.9 billion assessment based on a rationale that could, at best, only apply to the VAT portion of the dispute. This is a manifest error of law.’

Earnings from tea exports to India surged by nearly three quarters in the first half of 2025, overtaking industrial carbonates, or soda ash, to become the country’s top export to Asia’s third-largest economy.

India bought tea valued Sh1.97 billion between January and June 2025, data collated by the Kenya National Bureau of Statistics (KNBS) shows, a 73.4 percent jump over Sh1.14 billion in the same period of 2024.

Shipments of Kenyan tea to India increased by 65.89 percent in volume to 7.83 million kilogrammes in the review period from 4.72 million kilogrammes a year earlier

The jump saw tea dethrone carbonates and percarbonates, or simply soda ash, whose exports to India fell by 24.4 percent to Sh916.98 million from Sh1.21 billion a year earlier.

Volumes of the chemical exports, mainly disodium carbonate used in glass and detergents manufacturing, dropped to 31.17 million kilogrammes from 34.21 million kilogrammes.

India is one of the markets which has in the past been listed by Kenya Export Promotion and Branding Agency (Keproba) as difficult to penetrate.

‘We realise the Indian market has risen in terms of sophistication and even the demand must correspond to needs of the niches in the market. We are marketing key products into the market by developing a targeted IMC (Integrated marketing communications) plan,’ Keproba told the Business Daily in a past emailed response.

Besides tea and soda ash, Kenya’s exports to India include pigeon peas and coffee.

The bump in exports to India comes against the backdrop of a sector-wide downturn amid global tea prices slump which eroded earnings for farmers.

KNBS data show that total tea export earnings fell by 13.41 percent in the first half of 2025 to Sh176.76 billion from a record Sh204.14 billion the previous year – the first decline since the 2017/18 fiscal year.

The setback has rippled through the value chain, dealing a heavy blow to hundreds of thousands of smallholder farmers who rely on the crop as their main source of income.

Farmers affiliated with the Kenya Tea Development Agency (KTDA), for instance, earned between Sh0.80 and Sh19.10 less per kilogramme of green leaf in second payments – the annual bonus – during the year to June 2025 compared with the previous cycle.

KTDA blamed the reduced payouts on the strengthening of the shilling, which averaged Sh129 to the US dollar, compared with Sh144 the year before, wiping out an estimated Sh15 for every dollar earned.

‘The drop in tea prices was largely driven by huge tea stocks that had built up during the reserve price window, which was only removed in October 2024,’ KTDA said via email mid-October.

‘Geopolitical challenges and instability in key markets such as Pakistan, Russia, Sudan and Iran also affected demand, though the situation has now slightly stabilised.’

The pain for smallholder farmers was compounded by a drop in demand from Pakistan, Kenya’s largest tea market. KNBS data show that Pakistan – which accounts for about 40 percent of total exports – slashed its imports by 12.96 percent, with earnings from the destination falling to Sh74.01 billion in the first half from Sh85.03 billion the year before.

This marked the first drop in tea exports to Pakistan since the 2018/19 financial year when earnings from the South Asian nation fell by nearly 25 percent.

KTDA data show that average prices per kilogramme of made tea fell across all major producing regions – from Sh385 in 2023/24 to Sh322 in 2024/25. In Central Kenya, farmers in Kiambu earned Sh371, down Sh46, while those in Murang’a and Nyeri fetched Sh376 and Sh388, down Sh42 each.

The steepest declines were in the Rift Valley and Western regions: Kericho farmers earned Sh245, down Sh101, Bomet Sh209 (down Sh85), and Nyamira Sh266 (down Sh106).

With the rising popularity of crypto transactions and recent legislative developments in Kenya, a recognised leader in mobile money, the question of tax treatment of digital assets has become increasingly relevant. Should digital assets be subject to both Excise and Value Added Tax (vat)? The answer is far from clear.

Kenya has not had specific regulations for crypto assets for a while, with regulatory issues and related activities being addressed based on existing frameworks and in line with the mandates of the Capital Markets Authority (CMA) and the Central Bank of Kenya (CBK).

However, the CMA and the CBK’s rulemaking in crypto-assets or digital assets has thus far remained limited, and no formal instruments that specifically or expressly cover digital assets had been issued by either institution.

That said, the government recently introduced the Virtual Asset Service Providers (VASP) Act, 2025, establishing a regulatory framework for VASPs and addressing risks linked to the misuse of virtual asset services

According to Chainalysis, a US-based firm, Kenyans carried out transactions valued Sh426.4 billion ($3.3 billion) in stablecoins in the year up to June 2024, highlighting the increasing integration of virtual assets into economic activities.

Against this backdrop, understanding the tax and regulatory implications requires examining the key categories of virtual asset services operating in Kenya.

These include peer-to-peer exchanges, which enable fiat-to-crypto conversions; custodial services which help users safeguard private keys; and NFT marketplaces, which facilitate the creation and exchange of digital collectibles and art. These roles demand tailored regulation and taxation that reflect the distinct functions of digital assets.

Accordingly, Kenya’s legislative response signals a pivotal shift in the regulatory and fiscal landscape. Through the Finance Act 2025, the government repealed the 3 percent Digital Asset Tax (DAT) on gross transaction value and introduced a 10 percent Excise Duty (Excise) on fees charged by VASPs.

Under the Excise Duty Act (EDA), fees charged by VASPs on virtual asset transactions are subject to Excise at a rate of 10 percent of the excisable value.

This shift from the repealed DAT to Excise reflects a more targeted and administratively efficient approach, focusing on transaction fees rather than the gross value of digital asset transactions.

By taxing the fees instead of the entire transaction amount, the government preserves revenue while reducing economic distortions associated with taxing gross transaction values.

While the imposition of Excise on virtual asset transactions is explicit under the EDA, the same certainty does not apply to VAT. Under the Value Added Tax Act (VAT Act), VAT is chargeable on any taxable supply unless it is specifically listed as exempt under the First Schedule or zero-rated under the Second Schedule.

Virtual asset services are not included in these exemptions, raising a critical question: Are fees charged by Virtual Asset Service Providers (VASPs) subject to VAT?

This ambiguity is compounded by the similarity between VASP services and traditional financial services. The First Schedule to the Virtual Asset Act outlines the types of virtual asset services and their functions, including custodial wallet services, transfer and conversion services, trading, settlement platforms, payment gateways, and brokerage functions.

From the foregoing, the services offered by VASPs are akin to those provided by traditional financial institutions. Notably, Part II of the First Schedule to the VAT Act exempts certain financial services from VAT.

However, it does not specifically include services offered by VASPs, creating uncertainty around their VAT treatment despite their functional alignment with conventional financial services.

The current lack of clarity on how to tax virtual asset transactions is bound to give rise to tax disputes between VASPs and the tax authority.

Applying both Excise and VAT on these services creates an unfair tax environment, as cryptocurrencies are increasingly used as a medium of payment similar to other financial services exempt from VAT.

Best international practice offers useful guidance and provides clarity on where ambiguity exists. For instance, the European Union, Australia, the United Kingdom, and Singapore treat virtual assets activities, including bitcoin, akin to financial services and means of payment, thus exempting them from VAT.

This not only reduces compliance complexity but also lowers incidences of tax disputes and reduces transaction costs in the digital economy.

Building on these lessons, a clear and forward-looking policy framework is essential for Kenya. As such, policymakers should work closely with industry stakeholders to develop legislation that encourages innovation while safeguarding revenue.

Finally, the taxation regime for virtual assets must be clear and well-defined to reflect the country’s approach to fostering innovation, position Kenya as a competitive digital hub, and enhance compliance with tax regulations.

Travel and trade are crucial change agents in society, government and technology. The introduction of artificial intelligence (AI) is fundamentally altering how we travel and trade.

By utilising AI’s capabilities, the aviation sector is on the verge of massive disruptive changes that will present new opportunities and risks.

Using machine learning, predictive analytics and natural language processing, AI has the potential to revolutionise how institutions operate generally, but specifically by opening new avenues for customer service, risk management, business and travel advice.

For example, AI chatbots (computer programs designed to simulate conversations with human users, either through text or voice) and virtual helpers help with customer service around the clock, simplifying user interfaces and making it easier to answer questions quickly.

Consequently, they enhance consumer experience and reduce expenses. For instance, in risk management and credit scoring, AI algorithms can examine enormous amounts of data to identify patterns and assess risk levels. This makes trade data and travel information accessible to a broader audience.

Kenya Airways (KQ) recently signed a partnership with RoamBuddy to launch KQSafari Data, a solution developed at the Fahari Innovation Hub through the airline’s Open Innovation Challenge.

The service, offering more than 2,250 affordable roaming plans in 180 countries, aims to provide travellers with seamless, reliable, and cost-effective global data connectivity, addressing one of the key challenges for international passengers.

The African Continental Free Trade Area (AfCFTA), a deal aimed at significantly increasing trade within Africa, presents unique opportunities for AI. This also applies to the Single African Air Transport Market (SAATM), which potentially links 1.3 billion people in 54 countries with a combined gross domestic product of circa $3.4 trillion.

Ethiopia has started trading under the AfCTA. AI can hence make the bloc’s work better and reach its goals in both trade and travel.

For example, AI can help improve trade logistics by making delivery systems, customs processes, and tracking and tracing more effective and efficient. It can create and find the best travel routes and multi-modal options to move goods, predict delays and give both travellers and traders real-time information.

AI can analyse trade data to identify patterns, trends and connections. This is strategic for policymakers in making better choices, predicting and responding better to future trends.

AI-powered systems can make cross-border e-commerce more efficient, a sector that is highly anticipated to grow exponentially under the AfCFTA. This is because AI can create personalised product recommendations and automate customer service.

However, for AI to achieve the goals for AfCFTA and SAATM, it is essential to have good AI governance and regulation.

More investments must be made in digital infrastructure and education. With education and training, AI can help people acquire the skills they need for an African economy that works better together.

AI systems can cross-link passenger data and baggage/cargo manifests to detect inconsistencies.

Using AI plus blockchain, border management agencies could track every cargo item and passenger bag through secure, time-stamped digital records -> making it almost impossible to insert illicit material unnoticed. The outcome is improved accountability and transparency from check-in to aircraft loading.

Kenya Bureau of Standards (Kebs) has been directed to undertake a fresh due diligence on pre-qualified firms in a multi-billion shilling tender for inspection of goods before leaving the country of origin.

The Public Procurement Administrative Review Board found that Kebs was unfair to World Standardisation Certification Testing Group (Shenzhen) Co. Ltd when it disqualified the Chinese firm without giving it a hearing.

The company, which won Pre-export Verification of Conformity for inspection of motor vehicles, spare parts and other equipment for conformity to Kenyan standards on May 9, 2022, was disqualified for the 2025-2028 tender.

The firm said that despite meeting all eligibility and mandatory requirements, it was disqualified through a letter September 23, 2025, which alleged that the company had ‘on several occasions breached its contract with Kebs thereby compromising the safety of the population’.

But the procurement watchdog said the firm was not afforded an opportunity to be heard on some of the issues which the tender evaluation committee relied upon in reaching the decision to disqualify it.

‘The Evaluation Committee, in exercising an administrative function, was under an obligation to accord the Applicant a fair hearing before making a decision that adversely affected its interests,’ said the board.

The Chinese firm’s current contract was extended for six months, on May 7 to November 8, but it was served with the termination notice, two months to the end of the contract. The firm then rushed to court and obtained orders, blocking Kebs from terminating the deal.

In the decision on October 27, the board directed Kebs to re-convene the evaluation committee and undertake a fresh due diligence exercise on the firm, ‘in strict compliance with the provisions of the Tender Document, the Act and the Regulations’.

Further, the board directed the procurement process to be concluded within 30 days from the date of the decision.

Kebs invited the bids early this year and 19 firms, including the Chinese firm, expressed interest. After the preliminary evaluation, nine tenders were found to be non-responsive and were disqualified.

The remaining 10 satisfied all the mandatory requirements and were accordingly declared responsive and subsequently admitted to the technical evaluation stage for further assessment. All the firms were recommended for pre-qualification, subject to the outcome of a due diligence exercise.

The board was informed that the head of procurement at Kebs reviewed the entire procurement process, including the evaluation of tenders, and concurred with the evaluation committee’s recommendation not to prequalify the Chinese company.

The firm said it would be exposed to financial loss and reputational harm, having legitimately expected to be pre-qualified after meeting all technical, eligibility, and financial requirements.

We all chase high returns, but what about the costs? Investment fees, commissions, and charges can quietly erode your gains. What’s a reasonable cost of investing-and when do the charges start to hurt your portfolio?

Lydia Muriuki, Senior Relationship Manager at Standard Investment Bank (SIB), joins us to pull back the curtain on these costs. She unpacks the different types of investment fees, how they impact your returns, and how to keep them in check.

Make Money, a podcast series, hosted by Kepha Muiruri, from Business Daily Africa unravels ways to be financially savvy. Get practical tips and advice on how to increase your income, build wealth, and achieve financial freedom in Kenya. Whether you’re just starting out or a seasoned investor, we’ve got something for everyone.

Residential property developer Mi Vida Homes plans to raise between Sh15 billion and Sh20 billion from both local and international institutional investors in the first quarter of 2026 in what is earmarked to be Kenya’s first hybrid real estate fund.

A hybrid real estate fund is an investment vehicle that is designed to mobilise capital from investors by combining both an Income and Development Real Estate Investment Trust (Reit).

A Reit is a regulated vehicle that addresses the liquidity risk of real estate by allowing individual investors to pool funds and invest in property that would be otherwise out of reach for them in their individual capacity.

Development Reits focus on financing the acquisition of land, construction and development of properties with the end goal being generation of profit by selling or leasing the complete projects to investors.

Income Reits, on the other hand, allow individual players to invest in already completed and income-generating real estate projects and earn revenue primarily through rental income.

Mi Vida, which had earlier planned issuance of a Sh4 billion Development Reit in 2026, says the change in design and amount of its planned fund is geared toward addressing fast growing market demand for institutionalised real estate development.

The company adds that the just concluded management buyout that has seen the exit of the firm’s founding investor, private equity firm Actis, frees it up to tap into local capital to finance growth.

Mi Vida on October 16 announced its management team had signed an agreement to buy out Actis that had owned the property firm for seven years.

‘Much as it’s a management buyout, Mi Vida remains an institutional developer because it means now we have the capacity and the opportunity to bring onboard other local institutional capital,” Mi Vida CEO Sam Kariuki said.

“Because of the opportunity that we are seeing on the affordable housing side of the market, the plan has always been to raise a fund of some sort. We had planned a Development Reit but now want a hybrid whereby the fund takes on development risk while still holding Income Reit characteristics from a yield perspective.”

In setting up the hybrid real estate fund, Mi Vida will be looking to ride on its credentials having been granted the greenlight by the Capital Markets Authority in 2024 to act as a Reit manager in the market.

The company says the real estate fund will be Kenya shilling denominated and is banking on high double digit returns to woo international investors who would otherwise shy away from local currency exposure in their portfolio.

‘We are already at the early structuring stages of the fund and from the first quarter of 2026 we should be in the market talking to investors which will be local and also potentially international investors,” Mr Kariuki said.

“Even when we will be talking to international investors, they will be required to be comfortable with local currency exposure and as long as the fund yields something in the high teens and early twenties in total return it will meet their hard currency return requirements.”

Mi Vida’s planned hybrid fund will be joining the list of regulated assets that target crowding in more investors into real estate as an asset class. So far, ILAM Fahari I-Reit, Laptrust Imara I-Reit, Acorn I-Reit, and Acorn D-Reit are in the market with majority being listed in the Unquoted Securities Platform of the Nairobi Securities Exchange.

One question we should be asking ourselves as more banks launch their own financial technology or fintech subsidiaries is whether it creates a conflict.

Are the fintechs competitors to banks, or are they partners complementing each other? How are the symbiotic relationships between banks and fintechs being handled?

Yes, these fintechs are crucial because they have allowed digital payments, mobile money, online lending, savings and investment platforms, insurance technology, wealth management (robo-advisers), and even cryptocurrency and blockchain applications, and predict fraud and computer outages.

They are gradually stripping away the inefficiencies of traditional banking systems by using digital tools to lower costs, speed up transactions, and expand access.

In Kenya and Africa at large, this means enabling the unbanked or underbanked population to make payments, access credit, or save through mobile phones.

In an effort to keep up with technology, spur innovation, and tap into fintech’s hypergrowth, banks are now in a race to partner with fintechs.

Some operate as standalone or semi-autonomous fintech subsidiaries under their parent banks, a strategy that enables faster innovation outside legacy banking systems while maintaining regulatory compliance and brand connections.

Others do it differently.

A McKinsey report shows that of the top 100 banks by assets and other digitally advanced banks, four out of five have now partnered with at least one fintech company. That is up from 55 percent just two years ago.

For instance, Equity Group launched its fintech subsidiary, Finserve, about seven years ago. Nigeria’s Stanbic IBTC Holdings, in 2022, started a fintech subsidiary called Zest Payments.

Stanbic Kenya had similar plans, but last year it put its fintech subsidiary on hold just months after receiving regulatory approval. Barclays Plc partnered with Flux Systems to give customers itemised receipts on their smartphones, allowing them to see in detail how they spend their money.

Elsewhere, Bank of Kigali perhaps stands out. It operates a distinct fintech subsidiary. Bank of Kigali does solely commercial banking, while BK TecHouse, founded in 2016, serves as a digital enabler, collaborating directly with the bank to develop fintech products.

Digital adoption is no longer a question but a reality. Around 73 percent of the world’s interactions with banks now take place through digital channels, a McKinsey report notes. Therefore, without embracing technological innovation, banks risk fading into irrelevance.

However, the bank-fintech strategic alliance has to be a cautious one. The banks must remain the mothership, and the fintech the speedboat. In a partnership where this is not well understood, the favour will tilt towards the fintech, and these companies will become a significant threat to banks. Reason? Fintechs grow fast because they move quickly, try new ideas, and run simple operations, processes that can slow down once they face the strict rules of traditional banks.

Banks, by contrast, are known to be the opposite. They remain anchored in slow, rigid structures. Without proper separation, they risk being overtaken, or even swallowed, by the very fintechs they seek to control.

In fact, while partnerships between banks and fintechs have increased over the years, full acquisitions remain rare because, as McKinsey notes, ‘integration often slows decision-making and innovation cycles, undermining fintechs’ competitive advantage.’

Therefore, when a bank acquires a fintech, it must make sure that the same resources it has on the speedboat, which is a fintech, it has similar resources in the mothership, which is a bank.

Bank-fintech collaboration isn’t just a strategy; it is survival. But harmonisation, not dominance, must be the guiding principle.

Perhaps the other conversation we should be having is about neobanks, the digital, branchless units to capture the younger, tech-savvy generation that traditional banks often struggle to reach.

A court has dismissed SBM Bank Kenya’s bid to lift a seven-year-old injunction against recovery of a Sh29.3 million debt from a tourists resort in Naivasha, upholding an interim order protecting the luxury hotel’s prime properties from auction.

The debt is part of an unspecified amount of loan advanced to the hotel, Lake Naivasha Crescent Camp Limited, by the bank’s predecessor Chase Bank in 2017.

In a ruling that underscores Kenya’s delicate balance between creditor rights and borrower protections, the High Court dismissed SBM Bank’s application to lift the 2018 injunction, finding the lender failed to prove the hotel operator abused court processes.

“The May 29, 2018 court orders were clear that status quo be maintained pending hearing and determination of this suit. There is no doubt that this suit is yet to be determined since hearing has just commenced,” said the court.

The decision preserves the hotel’s ownership of two Nakuru Municipality properties used as collateral for Chase Bank loans in 2017, leaving the SBM bank grappling with mounting losses since the borrower defaulted.

The court ruled that SBM Bank, which took over Chase Bank Kenya’s assets through receivership after its 2018 collapse, failed to prove that the injunction had outlived its purpose.

The decision extends a legal shield for the hotel.

The dispute started in 2018 when the borrower defaulted and the bank initiated recovery efforts, prompting the company to seek court intervention and protection from forced sale of the collateral.

A status quo order was issued on May 29, 2018, barring the bank from selling the properties pending the suit’s determination.

SBM Bank, which also assumed Chase Bank’s liabilities, accused the borrower of exploiting the injunction to avoid repayment. It alleged that as at February 2024 only Sh14 million of the outstanding Sh43.3 million debt at the time had been settled, leaving a balance of Sh29.3 million.

The case took a twist when Chase Bank collapsed in 2018 and was placed under receivership. SBM Bank later acquired its assets, including the disputed loan, inheriting the legal battle.

Despite a 2022 settlement agreement where the borrower paid the Sh14 million, SBM accused the firm of breaching terms and frustrating recovery by hiding behind the injunction.

In court filings, SBM’s legal officer argued that the status quo order, initially meant to be temporary, had become a “permanent shield” for the borrower. The bank warned that delays risked rendering the secured properties worthless as accrued interest ballooned the debt.

“The plaintiff has enjoyed six years of court protection without clearing the outstanding balance. This is an abuse of equitable remedies. Unless the status quo order is discharged, the outstanding sum would outstrip the value of the property thereby plunging the applicant (SBM Bank) into losses,” SBM’s lawyers submitted.

In defense, the borrower countered that SBM lacked legal standing (locus standi) to seek the injunction’s discharge since it was never formally substituted as Chase Bank’s successor in the suit.

“No amount of averments can make it a party to these proceedings without substitution and amendment,” said the borrower’s advocate, citing the Civil Procedure Rules, 2010.

Arguing that SBM was a stranger to the proceedings, the borrower said a party “cannot assume a dead party’s role without court approval”.

The court partially agreed, allowing SBM’s belated entry as defendant but refusing to alter the injunction. The trial judge emphasized that asset acquisition did not automatically grant SBM rights to alter court orders.

While the ruling deals a financial blow to SBM in its debt recovery efforts, for borrowers it reinforces the judiciary’s reluctance to lift injunctions unless lenders demonstrate concrete abuse.

However, the court directed both parties to expedite the process, signaling the court’s impatience with the seven-year delay.