Credit Bank, the Nairobi-based lender co-founded by Ugandan businessman Ketan Morjaria, is under the spotlight following a Court of Appeal ruling that froze the transfer of a prime property acquired at the bank’s own auction for Ksh1.125 billion ($8.7 million). The court’s intervention has cast a shadow over what the bank described as a routine enforcement of a Ksh817.8 million ($6.32 million) loan, raising broader questions about the transparency and conduct of property auctions by lenders.
A three-judge appeals bench halted the transfer of the Mavoko parcel, citing “arguable issues” concerning how the auction was conducted. The judges questioned whether the bank complied with statutory requirements on valuation, independent bidding, and self-purchase practices. Credit Bank purchased the property itself after no external bidders emerged during the December 2023 auction, a move that has drawn scrutiny given the significant gap between the hammer price and the borrower’s claimed open-market value.
The borrower, Erdemann Property Ltd, contends that the property’s market value is closer to Ksh2 billion ($15.47 million), nearly Ksh900 million ($6.96 million) above the sale price. Erdemann had publicly warned potential bidders of procedural irregularities through local notices, which the bank says discouraged outside participation. The appellate court stressed that lenders must maintain transparency and fairness, even when borrowers attempt to frustrate the sale, leaving the bank’s self-purchase open to review.
Founded in 1986 by Ketan Morjaria and Jay Karia, Credit Bank has grown from a small community-focused lender into one of Kenya’s established mid-tier banks. The founders retain stakes of 9.88 and 8.61 percent respectively, and have driven initiatives to expand SME lending, branch networks, and digital financial services.
With the appeal fast-tracked, the bank is currently barred from selling, transferring, or otherwise disposing of the Mavoko property until the legal dispute is resolved. The outcome is likely to have wider implications for how Kenyan banks conduct auctions and enforce property sales in cases of loan default, putting Credit Bank under close industry and public scrutiny.
