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Banks, courts push for deal on loans’ impasse

Banks and courts have highlighted the importance of out-of-court settlements with borrowers as close to Sh10 billion gets locked up in legal disputes annually.

Latest data from High Court shows 159 out of 660 cases filed in commercial and tax division in 2015 were bank-related and were valued at Sh8 billion with the value tied up in litigation rising to Sh10 billion by the end of May, this year.

Over the first five months of the year, 24 per cent of 249 suits filed in court and valued at Sh2 billion were largely credit and transaction-related cases. “The amount we have locked up in litigation in this division arising out of bank related cases is extremely large by any standards,” said High Court Principal Judge Richard Mwongo.

A 2013 survey by Kenya Bankers Association (KBA) shows borrowers were not very happy with interest rate charges and inefficiency in a number of bank automated teller machines (ATMs). Operations related cases were ranked the highest at 56 percent of bank related cases followed by credit and customers dissatisfied with service offered by banks’ human resources.

“Most of these cases are originating from customers who are not aware of existence of mediation programmes,” said KBA chairman Habil Olaka. Milimani Law Courts commercial/tax division deputy registrar Elizabeth Tanui said more than 5,000 cases were still pending in court due to their complex nature, with majority of them being bank-related.

“These cases are still taking too long to resolve with some taking up to 10 years,” said Tanui. Rules governing mediation as an Alternative Dispute Resolution (ADR) were gazetted in April to cut the backlog of cases and huge cash lost, mostly by banks.

The rules require all cases filed from May, this year be screened to ascertain whether the matter revolves around a point of law and is of public interest to qualify for a mediation process.

A total of 493 cases have so far been screened, with 45 referred to the Mediation Accreditation Committee that came into force in February, last year for resolution. Mediation is expected to cut down time it takes to end disputes to a maximum of two months, a trend that could place auctioneers out of business and see some fears lawyers lose out in legal fees.

“The Judiciary has no intention to go back on alternative dispute resolution. I can confidently state that all the noise about litigators losing money to ADR is just that, noise,” said Mwongo. He termed litigation an expensive, arduous and time-consuming, which reduces value of client represented.stands.

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