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Credit Bank, the Nairobi-based lender co-founded by Ugandan businessman Ketan Morjaria, is facing heightened legal scrutiny after the Court of Appeal froze the transfer of a prime property the bank acquired at its own auction for Ksh1.125 billion ($8.7 million).
The court’s intervention has turned what Credit Bank insists was a routine enforcement of a Ksh817.8 million ($6.32 million) loan into a high-stakes dispute with industry-wide implications for how lenders exercise the statutory power of sale.
Appeal triggers freeze as judges question transparency
A three-judge appeals bench blocked any transfer of the Mavoko land, citing “arguable issues” over how the auction was run and whether Credit Bank followed rules on valuation and chargee self-purchases.
The property, in a prime Mavoko location, sold for Ksh1.125 billion ($8.7 million), the forced-sale value from a bank-commissioned December 2023 valuation. With no outside bidders, Credit Bank bought the land itself.
Judges said the bank failed to explain key gaps, including whether any independent bidders took part, what the highest bid was, and how the sale met statutory requirements. Those questions, they ruled, warrant preserving the property until the appeal is heard, placing Credit Bank’s self-purchase under scrutiny.
Valuation gap becomes flashpoint as borrower argues property worth
The borrower, Erdemann Property Ltd, claims the parcel’s open-market value was Ksh2 billion ($15.47 million), nearly Ksh900 million ($6.96 million) above the hammer price. While undervaluation fights are common, Credit Bank’s dual role as seller and buyer has made this case especially sensitive.
Erdemann ran caveat emptor notices in local newspapers warning bidders, accusing the bank of procedural irregularities—ads that Credit Bank argues scared away potential buyers and forced it to step in.
However, the appellate bench emphasized that a lender must demonstrate transparency and fairness even when borrowers attempt to frustrate a sale. Credit Bank maintains that even if Erdemann’s allegations were proven, the law is clear: a borrower’s remedy is damages, not reversal of sale.
All eyes on the fast-tracked appeal
Founded in 1986 by Ugandan-British entrepreneurs Ketan Morjaria and Jay Karia, Credit Bank has grown from a small community-focused finance house into one of Kenya’s established mid-tier lenders.
Over nearly four decades, the founders, Ketan Devram Morjaria and Jay Rajnikant Karia, own 9.88 and 8.61 percent stakes through their investment vehicles. To improve financial access for underserved market segments, Credit Bank has deepened SME lending, grown its branch network, and pursued digital transformation under their direction.
Credit Bank is currently unable to sell, transfer, or otherwise dispose of the property because the Court of Appeal has ordered both parties to submit their cases on an expedited basis, which has frozen the Mavoko parcel.
