Norway and the Netherlands have asked Uganda to protect DFCU Bank from bad publicity, which they say is affecting investor confidence.

In a letter to the Minister of Finance Matia Kasaija, Annlaug Ronneberg who is in charge of business affairs at the Norwegian Embassy and Henk Jan Bakker the Netherlands ambassador to Uganda have warned that the negative sentiment could affect foreign direct investment flowing into the country.

Norway and the Netherlands have an interest in the matter that has refused to go away because Arise B.V, the majority shareholder in DFCU Bank is owned by Norwegian and Dutch investors — Norfund, Norfinance, FMO and Rabobank.

The bank has attracted bad publicity, mainly online, since it acquired Crane Bank in January 2017 at a cost of Ush200 billion ($52.8 million) and then went ahead to more than double its profit in a year.

Its net profit grew from Ush46.2 billion ($12.2 billion) to Ush127 billion ($33.5 million).

More controversy

Crane Bank’s former owner Sudhir Ruperalia claimed the Bank of Uganda took over his bank in bad faith and sold it off cheaply.

DFCU Bank has threatened to sue some online publications and Mr Ruperalia’s son over this bad publicity.

By the time the embassies wrote in, there were reports that Britain’s Commonwealth Development Corporation, the second biggest shareholder in DFCU Bank, was in the process of looking for a buyer.

Analysts at the time speculated that CDC’s managers were looking to exit DFCU Bank while its books showed it was at its best moment, perhaps believing that the lifeline that came with the acquisition of Crane Bank would not last.

That is not all the controversy that the sale has generated.

Mr Ruperalia has also sued DFCU Bank to try to recover some properties that he argues were not owned by Crane Bank, but were taken over and sold by the Bank of Uganda.

Probe

This is in addition to an ongoing probe by the Parliamentary Committee on Commissions, Statutory Authorities and State Enterprises into the Bank of Uganda’s closure of seven commercial banks over the past 25 years.

Anita Among, the committee’s vice chairperson, says parliament is no longer sure of the Bank of Uganda’s management’s abilities to handle the financial sector.
“We would like to find out why these commercial banks are collapsing. We would also like to know the Bank of Uganda’s role in the collapse of these commercial banks,” she says.

So far, the Bank of Uganda has been caught on the back foot. On November 1, the committee threw the Bank of Uganda officials including Governor Emmanuel Tumusiime-Mutebile and his deputy Louis Kasekende out of parliament after they failed to present critical documents on the closure of seven commercial banks.

Rationale questioned

The Cosase is using as a blueprint for the investigation, a report by the Auditor General, in which the Bank of Uganda has been accused of committing a number of illegalities during the process of liquidating the seven commercial banks.

The commercial banks, which were closed over a 25-year period, were Teefe Bank, International Credit Bank, Greenland Bank, Co-operative Bank, National Bank of Commerce, Global Trust Bank (GTB) and Crane Bank.

One of the issues that the committee will query is the Auditor general’s report that DFCU Bank was sold a clean and recoverable loan book worth Ush570.4 billion ($150.6 million).

The Auditor General questions the rationale for the low sale price of only Ush200 billion ($52.8 million).

The Auditor General says that when Bank of Uganda officials were asked about this anomaly, they claimed that DFCU had been sold the bad loan book as well. According to the Auditor General, Bank of Uganda officials lied when they claimed to have sold Crane Bank’s bad loan book.

Illegality

DFCU Bank had earlier benefited from a process to sell Global Trust Bank.

GTB was closed in 2014. Following this closure, the Auditor General says Bank of Uganda sold well secured loans belonging to GTB at a discount.
The Auditor General says this is illegal under the Financial Institutions Act.

The DFCU Bank’s links to at least two of the defunct commercial banks that are under scrutiny means that negative perceptions will continue for as long as the cases in court and the Parliament and Inspectorate of Government investigation into Bank of Uganda are ongoing.

Parliament has on several occasions attempted to probe Bank of Uganda and has even recommended Governor Tumusiime-Mutebile’s removal, but this has not happened.

Neither Mr Kasaija nor any of his colleagues in the ministry have yet responded to the request by Norway and the Netherlands.

A state minister told The EastAfrican that DFCU Bank should bear the responsibility of cleaning its own image.