Lake Region Economic Bloc (LREB) has dropped its long-term plans to set up a multi-billion-shilling regional bank after the Office of the Controller of Budget declined to approve the idea.

Sources close to the project told the Business Hub that the bloc lacks legislative backing to allow member counties to collect funds for the project.

Victor Nyagaya, LREB chief executive said each member county was to contribute Sh200 million for this ambitious project whose plans were conceived years back. “It is only Kisumu County that has since contributed Sh100 million to the bank’s kitty. The rest had not,’’ disclosed the source.

The bloc brings together Kisumu, Kakamega, Kericho, Busia, Nandi, Migori, Homabay, Siaya, Kisii, and Nyamira. Others are Bungoma, Tranzoia, Vihiga, and Bomet counties.

Nyagaya told the press in an interview, LREB was formed in 2018 to foster economic development in the great lake’s region. Member counties were banking on the proposed Sh2.8 billion-regional bank to avail low interest loans to its people.

“Our aim was to set up a bank that would support small and medium enterprises to spur economic growth,’’ said the CEO. However, Nyagaya said counties like Kakamega, Busia and Kericho were in the process of contribution.

“Controller of the Budget advised LREB members against indulging in such financial transactions, it termed illegal,’’ he said. This is because of a lacuna in law, defining the parameters of the bloc’s binding activities and rules of member’s engagement.

The LREB Bill has been pending in Parliament for the last five years. It is now in the Senate awaiting approval. The bloc needed the approval of at least six of the counties to be recognised as a legal entity, a threshold that they had met.

Members of the bloc will have to wait until the Bill is enacted into law, before they can engage in any financial transaction.This is due to the financial caveat placed by the Controller of the Budget, that warns any transfer of cash to the kitty now is illegal.

Stunned by the development, LREB leaders of the bloc have now opted for a savings and credit cooperative society (Sacco) to sustain the bloc’s economic model. Already, the bloc has done the legal paperwork, to allow them register the bloc’s co-operative Sacco formally.

“We want to start with the Sacco and then build it slowly to graduate into a bank, ultimately,’’ Nyagaya said. He acknowledged that this is a long route though, but they opt to grow it to achieve the ultimate goal – set up a regional bank.
Earlier, the bloc contracted a consultancy firm Deloitte to help it identify an existing bank for acquisition. Deloitte had begun to negotiate with four banks to choose one LREB could buy its controlling shares, before they were stopped.
Currently, Kisumu Governor Prof Anyang Nyong’o, chairs LREB council. He took over from former Kakamega Governor Wycliffe Oparanya, whose term expired at the end of his ten years in tiller.
“As things stand, LREB headquarters is starved of funds. They only rely on partners to finance some of its projects,’’ the CEO said.

Although, they have a number of good projects, the office domiciled in Kisumu County, has to work with partners or fail.

Luckily, Nyagaya disclosed that many development partners who liked their model were coming on board with collaborative projects.

“We have partners funding our proposals directly and this has seen us hold summits and some projects fruitfully,’’ he said.

Nyong’o is optimistic that the bloc’s vision will not be dimmed, in the long run, adding, “We will achieve our desires, however long it takes.’’

The Lake Region is one of the most densely populated regions of Kenya with 14.9 million people who constitute about 31.4 percent of the population in Kenya.

Early this year as part of its ongoing efforts to promote digital transformation at county level, Safaricom entered into a partnership with LREB to implement various initiatives aimed at accelerating the region’s adoption of technology. The initiatives implemented under myCounty App include digitising the counties.