So who killed Trade Bank?

When Assistant Minister Dr Bonny Khalwale rose to speak in parliament last week, he had some really scathing allegations to make against one of the country’s fastest growing and most innovative bank, Equity.

“The CEO at Equity Bank was the finance manager at Trade Bank…” This was one of accusation that Dr. Khalwale brought to the floor of parliament when he sought to question the operations at the bank.

Khalwale’s accusation were part of a letter that has been circulating in the emails written by one SK Patel.

“Mr speaker sir,” Dr Khalwale told parliament, “I fear that the CEO might sink Equity Bank, in the way that they sunk Trade Bank.”

With these remarks, Khalwale, who is the assistant minister for East African Cooperation and Regional Corporation, seemed to point apportion the blame of the collapse of Trade Bank on the investor and managers.

But were the Bank’s investors and managers responsible for the collapse? LKet’s look at the one decade life of Trade Bank to find out.

A great idea in the banking industry

To most financial analysts, Trade Bank was one of the most brilliant ideas in Kenya’s banking industry in the 1980s. The financial institution was the brainchild of businessman, Alnoor Kassam who now lives in Canada and his brother Iqbal Kassam. Before Trade Bank, Kassam had bought the local franchise Diners Card, then, a moribund plastic money business offering its services to Europeans in the country.

When he bought the franchise, he quickly transformed it into a vibrant business by refocusing it to serve indigenous Kenyans. Within a short time, Diners Card became one of the most successful financial services in the country that attracted top cream professionals in the finance with its remuneration packages that were the best in the country.

Replicating Diner Card success

In founding Trade Bank, Kassam and his brother had hoped to replicate the success of Diners in the banking industry which was highly skewed against the low and middle income earners.

Long before the micro finance banking was anything to speak about, Kassam and Iqbal fashioned their bank to attract small depositors by pegging high interests on deposits and doing away with complicated account opening procedures which were the norm then.

For an industry that was marked by lowest interests on deposits, Trade Bank’s interests were quite revolutionary as they were attractive.

True to the bank’s slogan, Hakuna Maneno (no hassles), at Trade Bank, one required an ID and a passport size photo only to open an account unlike in other banks, where one was required to produce letters of introduction, payslips among other documents.

On top of this, the Bank introduced other very innovative services that spiced its attraction to depositors. In a break from the tradition of the time, it used to operate for long hours unlike the other banks which would shut its doors by 3.00 PM. In another fast one, the Bank was the first to operate on weekends.

At the Trade Bank Centre, what is today the Integrity Centre, the Bank Operated a drive in banking services where account holders would access services while waiting in their cars and drive out.

But that was not all. Long before the local banking sector had heard about it, Trade Bank introduced unsecured loans where like is the practice in the banking sector today, all one needs for access credit is a payslip.

The Kassam magic began to pay off almost immediately as small depositors began flocking the bank to open accounts and for the hassle free credit facilities.

Where did the rain begin to beat Trade Bank?

As an inactive director of the bank, Kassam and his brother had ceded control of the bank to Gad Zeevi, one of the directors, a Jew, who unbeknown to many people was the business front of one of the most powerful politicians in the country and Ian Rayner, the managing director.

In a bid to consolidate his control in the Bank, Kassam began buying out stakes of some of the directors.

One of the people Kassam bought out was Gad Zeevi in a move that gave him an opportunity to track the operations of the bank.

Enter Moi Era Powerbrokers

During the purchase of the shares, Zeevi was forced to disclose that he had prevailed on Trade Bank to lend Shs 400 Million, which was a higher amount than what it had to LZ ltd, a construction company owned by the powerful minister in the then Moi’s government. The loan was for the construction of an ultra-modern commercial property in Kilimani area, named after Zeevi’s daughter.

Kassam immediately reported the fraud to Central Bank of Kenya and immediately embarked on attempts to compel LZ ltd, to pay up the loan.

As Kassam was to discover LZ had no intentions of paying up the loan. Once when he tried to attaché the property, LZ contracted a valuer who put the price of the property. LZ contracted a valuer who put the piece of property at shs 900 million meaning that any attempts to sell the property would mean that Trade Bank would still have to pay LZ Shs 500 million.

The hunter becomes the hunted

Parallel to the upping of the value of the property, the politicos had set in place a motion a process to have Kassam arrested and charged with fraud. When he decided to drive towards Namanga to escape Special Branch’s dragnet, it had finally occurred to him that he had nowhere to turn in his bid to stabilize the bank. So he let it crumble and left the country, not a businessman, but a fugitive.

From the foregoing, one wonders; between the innovative investors, the hard-working bank staff who gave Trade Bank the positive edge it had acquired in the market and the politicians who borrowed money with no intention to paying; who really killed Trade Bank?