Escrow scam eats into Mkombozi Bank IPO

The Initial Public Offering (IPO) issued by Mkombozi Commercial Bank last month has been undersubscribed by 25 per cent as the bank is expected to list on the Dar es Salaam Stock Exchange next week.

The church-owned bank wanted to raise Sh5 billion from its five million shares issued but managed to collect Sh3.7 billion which is equivalent to 75 per cent, according to Ibrahim Mshindo, DSE acting chief executive officer.

“As we speak, we are in preparations of the listing on Monday, December 29, 2014,” he said.

The performance of the IPO was expected to go beyond 100 per cent, but it was affected by the report and discussions in Parliament about the escrow scandal.

Mkombozi Bank was accused of transferring money from the Escrow account to some individuals including government officials and religious leaders.

The IPO started on November 3 and ended on November 29 while the report was presented in the National Assembly on November 26.

“Many investors wait for the last week to make decisions and that is the time the report was presented in Parliament. It actually changed the sentiment,” said George Fumbuka, chief executive officer of Core Securities, the sponsoring broker.

However, he said the 75 per cent success in the IPO was a great achievement to the bank as it was enough to meet the minimum capital requirement of Sh15 billion the bank wanted as directed by the Bank of Tanzania.

The bank’s capital is now estimated at Sh16.8 billion after the IPO, said Mr Fumbuka. The bank wanted to raise the required funds to reach the regulatory target and use the surplus to enable the bank to tap into new areas of business, open more branches to increase its outreach and, generally, expand its operations.

The listing of the bank on the DSE was expected on November 22 but it was delayed pending some regulatory issues before approval.

“There are some changes. For instance, nowadays, brokers are supposed to prepare depository certificates which were formerly done by the DSE. We have no experience in that and it contributed to the delay,” said Mr Fumbuka. 

Mkombozi Bank will be listed on the Entreprise Growth Market (EGM), an alternative listing window with relaxed rules for small and medium-sized companies.
Source: The Citizen, reported by Alawi Masare from Dar es Salaam, Tanzania
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