Kenyan social media has been awash with messages directed at Family Bank customers warning them of a possible collapse of the country's fifth largest bank in terms of the number of branches.
Family Bank, which operates more than 90 branches countrywide has a customer base of 1.7 million, was the subject of a number of messages that were shared on Facebook, Twitter and WhatsApp saying that the bank was likely to go under receivership, advising customers to withdraw their deposits in order to avoid a potential cash crisis.
The bank’s management, however, moved to allay fears of a possible liquidity challenge, insisting that the bank remains stable. Family Bank Group CEO David Thuku termed the allegations as unfounded and malicious, adding that the bank is in a strong financial position.
We wish to reassure our 1.7 million customers that we are open for business and you can count on us to continue serving you. We are well within the statutory requirements as governed by Central Bank of Kenya, a fact that is easily confirmed through the returns we make as required by law. Wilfred Kiboro, Family Bank Group chairman
The messages on social media started appearing after a statement by Central Bank Governor Dr Patrick Njoroge endorsing the prosecution of the bank’s top officials over the KES 1.6 billion (US$15 million) National Youth Service scandal.
The banking sector has been under public scrutiny after it emerged that more than KES 10 billion (US$98 million) was acquired through falsified purchase orders and tenders from the National Youth Service and then channelled to private accounts through commercial banks.
Investigations have so far revealed that up to 28 banks were involved in these transactions, and the individuals behind them are currently under investigation by the Parliamentary Accounts Committee (PAC).
A businesswoman identified as Christine Njeri has since been arrested and questioned by detectives from the Banking Fraud Investigation Unit in relation to the messages being spread on social media about Family Bank, with Unit boss Ngatia Iregi saying that the matter has been under investigation since Wednesday last week when the messages started spreading on social media.
The 35 years old businesswoman is alleged to have made a series of malicious statements stating that Family Bank was under receivership, and the messages were spread and shared widely, causing some panic among social media users.
Family Bank becomes the second institution in less than a week to fight such rumours, with Prime Bank having launched a complaint with BFIU on reports linking the bank to irregular lending practices at Uganda's Crane Bank, which has since been put under receivership.
Social media was linked to the collapse of Chase Bank, whose directors are said to have issued themselves with large loans with ridiculous payment terms. With rumours circulating that the bank was going to shut down, a bank run ensued, with many customers withdrawing their deposits in a panic. As a result, the bank had to shut down due to a lack of cash, eventually going into receivership under the Kenya Commercial Bank.
No bank can survive if all the customers came one day and said they want their cash. Initially, when those rumours started, there was obviously a lot of fear and enquiries, so we engaged every customer to explain that those rumours were unfounded. David Thuku, Family Bank Group CEO.
While social media was not directly responsible for the situation at Chase Bank, the lack of a clear response from the bank, coupled with the rumours flying around that the bank was shaky and unstable only made the situation worse. As a result, banks have become a lot more sensitive over what is said about them online, which would explain why Family Bank and the BFIU moved quickly to stem the flow of rumours online and identify the person believed to have started the negative narrative.
Financial institutions operate on the basis of consumer confidence, therefore they are particularly susceptible when there are allegations that undermine this trust. Given the speed at which social media disseminates information, businesses need to work overtime to stay ahead of the narrative.