Safaricom Dealer Midrand Communications Ordered to Pay KSh44 Million KCB Debt

Safaricom dealer Midrand Communications defaulted on a KSh43.69 million Murabaha facility and stopped routing dealership commissions through KCB.

KCB Bank Kenya has won a commercial dispute against Midrand Communications Limited over a defaulted Sharia-compliant financing facility.

The High Court found that Midrand Communications breached its Murabaha agreement after failing to service the facility.

The court also found its guarantor, Abdinasit Mahat Salat, liable for breaching his guarantee.

Justice Wananda John R. Anuro delivered the judgement on October 2, 2026, at the Milimani Commercial and Tax Division.

The dispute arose from a Murabaha financing agreement signed between KCB and Midrand Communications on December 21, 2021.

Under the arrangement, KCB provided KSh32 million to finance Midrand’s Safaricom dealership business.

The facility carried an agreed profit of KSh11.69 million, bringing the total repayment obligation to KSh43.69 million.

Unlike a conventional interest-bearing loan, Murabaha operates as a Sharia-compliant cost-plus financing arrangement.

The bank and customer agree on an asset transaction, with repayment made through agreed instalments.

Missed Payments

Midrand Communications was required to repay the facility through monthly instalments of KSh728,099.

The payments were scheduled to run for 60 months under the financing agreement.

However, the company eventually stopped consistently servicing the facility, triggering substantial arrears.

KCB said Midrand also stopped channelling its Safaricom dealership commissions through its account.

That arrangement was central to the facility because the commissions formed its primary repayment mechanism.

The bank argued that stopping the payments amounted to a breach of the financing agreement.

KCB also said it repeatedly demanded payment before resorting to court action.

The bank issued demand letters on May 16, June 8, and September 27, 2023.

A further demand was issued on June 10, 2024, shortly before the proceedings.

The demands went unanswered, while the outstanding balance continued to accumulate.

Guarantee Triggered

KCB had also secured the facility through a personal guarantee and indemnity signed by Salat.

Under the guarantee, Salat undertook to cover losses arising from Midrand Communications’ default, up to KSh32 million.

The bank therefore sought declarations against both the company and its guarantor.

It also sought recovery of the outstanding facility, arrears, interest, and legal costs.

The defendants, however, neither entered appearance nor filed defences against the bank’s claim.

The Deputy Registrar consequently entered default judgement on July 30, 2025.

That judgement covered KCB’s liquidated monetary claim and interest at court rates.

The case later proceeded to formal proof on the remaining declaratory issues.

KCB called Ferdinand Kalafweri, its Senior Recovery Manager, who testified on behalf of the bank.

He adopted his witness statement and produced the bank’s documentary evidence before the court.

The evidence included the Murabaha agreement, guarantee, assignment letter, and registered chattel security.

KCB also produced demand letters and bank statements showing the outstanding amounts.

Court’s Finding

Justice Wananda found that the bank’s evidence remained uncontroverted because neither defendant participated in the proceedings.

The judge found no reason to question the validity or authenticity of KCB’s documents.

He also found the executed, witnessed, and stamped Murabaha agreement to be valid and enforceable.

The court identified three principal breaches by Midrand Communications.

First, the company failed to maintain the required monthly instalments, creating arrears of about KSh7.96 million.

Second, it stopped routing Safaricom dealership commissions through KCB, undermining the agreed repayment mechanism.

Third, it ignored several demands for settlement despite being notified about the continuing default.

The court also upheld KCB’s position concerning Salat’s personal guarantee.

Justice Wananda held that liability attached to the guarantor after the principal debtor defaulted.

The court relied on a Court of Appeal decision concerning enforcement of guarantees following default by a principal debtor.

It consequently found that KCB had proved its case on a balance of probabilities.

KSh44 Million Bill

The court formally declared that Midrand Communications had breached the Murabaha agreements.

It also declared that Salat had breached his guarantee by failing to settle the company’s obligations.

Both defendants were held liable jointly and severally for the obligations covered by the judgement.

KCB was also awarded the costs of the suit.

The court clarified that the monetary award had already been granted through the July 2025 default judgement.

That award comprised KSh36.35 million, plus arrears of KSh7.96 million.

Interest was also awarded at court rates from the date the suit was filed.

The judgement therefore reinforced the bank’s earlier monetary award rather than creating an entirely new debt.

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The case highlights the enforceability of Murabaha financing agreements within Kenya’s commercial justice system.

It also demonstrates the risks facing borrowers who breach repayment obligations tied to assigned business proceeds.

For guarantors, the ruling underscores the consequences of signing guarantees for commercial financing facilities.

Once the principal borrower defaults, a properly executed guarantee can expose the guarantor to enforcement proceedings.

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