A National Bank client has asked the High Court to close down the lender’s Islamic banking wing, and at the same time demanding Sh3.7 billion compensation in a loan repayment dispute.
Tulla Reserve Supplies Ltd has sued the lender for reportedly changing the terms of his Sh145 million loan that he had borrowed under the lender’s National Amanah, a move that the grains supplier argues has led to a massive loss of his business to a worth of Sh3.7 billion.
The firm claims the National Bank illegally changed his facility right from a fixed term loan to a revolving musharaka loan, a fact that ultimately raised the interest rates from 18.5 percent to an Islamic profit-sharing margin of 19.5 percent.
Under the revolving musharaka loans, Islamic banking terms are revised but the borrowers and the lenders open a joint account in which all the business proceeds are deposited before each and every party is paid their dues.
Director Diba Dado Hussein holds that the alleged switch to a revolving musharaka loans left his firm owing over Sh922 million to National Bank, a value that is against the Sh737 million his business made between the years 2014 and 2015.