Banks are counting on mediators to unlock up to Sh39 billion tied up in court cases to release the money back into circulation and ease the burden of fighting thousands of costly cases pending in commercial courts.
The lenders say the process presents a creative solution to resolve disputes, mostly linked to loan repayment terms, within a short period and in a cost-effective manner while preserving the relationship with customers.
Chief Justice Martha Koome disclosed on Thursday, that 12,213 bank-related matters involving Sh55 billion have been referred to a mediation process with 5,048 of them having been resolved and unlocking about Sh16 billion.
Now banks are counting on the growing popularity of court-annexed mediation — an alternative dispute resolution process where parties resolve their disputes with the help of an accredited third mediator under the supervision of the court — to unlock Sh39 billion.
Speaking at the inaugural mediation summit themed Banking and Mediation: Leading the way, Kenya Bankers Association (KBA) chairperson John Gachora said banks would be setting up mediation suites to make this the first approach in sorting issues with customers.
“To transform our economy and attract domestic and foreign investments, we must disrupt the way we resolve our commercial disputes.
“The lengthy court process prevents parties from accessing their funds, obtaining finances from banks and damaging business relations,” said Mr Gachora.
“We seek to fully embrace mediation in resolving customer challenges, reducing commercial courts backlog and releasing capital to the economy.”
The Chief Justice said the average turnaround of matters referred to mediation has dropped to 76 days compared to the previous 87 days in 2017 as opposed to the many months or years taken through the formal court processes.
“It is evident that the court-annexed mediation has contributed immensely towards the reduction of case backlog and an improved business environment in our country,” said the
The number of accredited mediators has risen from 74 in 2016 to 1,166 in the process, with 134 courts now able to handle court-annexed mediation matters.
Central Bank of Kenya (CBK) governor Patrick Njoroge said mistrust and dissatisfaction of customers in their dealings with banks have been on the rise and mediation will provide a route to reverse this.
“This is evidenced by the rising number of complaints that the CBK receives from customers. The CBK is aware of the negative implication that long litigation has on the economy. Delayed conclusion of commercial disputes impacts the circulation of funds in the economy,” said Dr Njoroge.
He said mediation is aligned with the CBK Kenya banking sector charter that was issued in 2019 to promote customer-centric business models and entrenchment of ethical culture in banking.
