Equity Bank Kenya

A sophisticated fraud scheme has rocked Nyamira County after senior officials allegedly siphoned Sh21.2 million from a World Bank-funded project aimed at transforming informal settlements into decent living spaces for thousands of residents.

The embezzlement of the Kenya Informal Settlement Improvement Project II funds, which were part of a larger Sh235 million conditional grant, has now triggered a criminal investigation by the Ethics and Anti-Corruption Commission and exposed a web of collusion between county officials and banking staff.

Documents obtained by this writer reveal that county officials and the KISIP II Nyamira County Project Coordinator, who were signatories to the project bank account domiciled at the Equity Bank Nyamira Branch, allegedly clandestinely withdrew the money and channeled it towards non-project activities, in flagrant violation of donor guidelines.

The scandal unfolded when Charles Hinga, Principal Secretary for the State Department of Housing and Urban Development, detected suspicious transactions on the project account and moved swiftly to freeze further operations.

In a hard-hitting letter dated October 21, 2025, Hinga ordered an immediate suspension of all project works and temporary freezing of account number 0520*****9409 at Equity Bank Nyamira Branch.

The alarm bells rang after preliminary investigations showed that funds earmarked for upgrading roads, installing streetlights, constructing drainage systems, and providing security of tenure to residents living in informal settlements had instead been diverted to unauthorized expenditure.

Bank admits internal fraud

The gravity of the situation became apparent when Equity Bank acting Managing Director Moses Okoth Nyabanda confirmed in a letter dated November 20, 2025, that the account had been frozen on November 1 and admitted the suspected irregularities resulted from internally orchestrated fraud.

“We have initiated an internal investigation into the operations of the said account to ascertain the circumstances surrounding the reported irregularities,” Nyabanda wrote in the letter addressed to Hinga and copied to Cabinet Secretary Alice Wahome.

The admission by Kenya’s second-largest bank by assets is particularly damning given that Equity Bank has been grappling with a wave of fraud cases.

In May this year, the bank fired 1,200 staff members in what CEO James Mwangi described as a ruthless anti-fraud crackdown after the institution lost Sh1.5 billion to staff collusion schemes.

The KISIP II scandal adds to Equity Bank’s mounting credibility crisis.

The bank has been accused of failing to flag irregular withdrawals and rapid large transfers from the Nyamira project account, raising questions about its internal controls when handling public and donor funds.

Widening investigation targets bank officials

Sources within the investigation team have revealed that the probe will now be widened to include Equity Bank officials suspected of colluding with county officials to facilitate the withdrawal of project money.

Kenya Insights has established that investigators are examining why the bank’s risk management systems failed to detect and stop the diversion of donor funds despite strict guidelines requiring that such accounts be monitored for irregularities.

When reached for comment on the matter, Equity Bank CEO James Mwangi did not respond to our queries by the time of going to press.

The KISIP II project, which is jointly funded by the Government of Kenya, the World Bank, and Agence Française de Développement, was designed to transform the lives of residents in nearly 200 informal settlements across 33 counties through improved infrastructure, land tenure security, and access to basic services.

In Nyamira, the project was expected to benefit communities in areas such as Keroka Market, where modern vendor stalls were to be constructed, and other informal settlements that desperately needed improved roads, water, sanitation, and lighting.

Governor Nyaribo silent on recovery

Governor Amos Nyaribo, whose administration has been dogged by multiple corruption scandals, did not respond to queries sent to him via phone and email regarding what remedial measures his government has taken to recover the lost funds.

The governor’s silence comes at a particularly precarious time for his administration.

Last month, the Senate heard impeachment charges against him, with members of the County Assembly accusing him of gross violation of the Constitution, abuse of office, and presiding over a payroll fraud syndicate that resulted in the loss of public funds.

On December 17, Nyaribo appeared before the EACC to answer questions about another corruption case involving irregular procurement and the award of a Sh382 million contract for the construction of county government offices.

Signatories changed, audit function weakened

It has since been established that the account signatories typically included the Chief Officer of Finance or their designate, the Chief Officer in charge of Housing, and the County Project Coordinator.

However, investigations have revealed frequent changes of personnel, making it difficult to pinpoint exactly who authorized the fraudulent transactions.

This pattern mirrors a broader problem in donor-funded projects across Kenya, where officials deliberately rotate signatories to obscure accountability.

Government investigators have also discovered that internal audit functions in Nyamira County were systematically weakened, with internal auditors either sidelined or transferred, while external audits were delayed long enough for money trails to fade.

Peter Orwa, a senior official in the Ministry of Lands, Housing and Urban Development, confirmed that the cumulative amount of funds diverted from the project account to pay for non-project related activities was Sh21,222,432.50.

“We have written to the county suspending the use of the conditional grant until corrective actions are taken. These include a change of the then bank account signatories, refund of all diverted funds, and appointing a dedicated internal auditor and strengthening the internal audit function,” Orwa said.

Donors’ strict reporting requirements circumvented

The diversion of KISIP II funds in Nyamira follows a disturbing pattern seen in numerous donor-funded projects across Kenya.

Once funds are disbursed into designated project accounts held in commercial banks, unscrupulous officials quietly alter signatories, authorise questionable withdrawals, or redirect money to non-project expenditures.

Insiders say donors’ strict reporting requirements are routinely met with forged progress documents, doctored audit trails, and manipulated site inspection reports.

In many cases, tenders are awarded to shell companies linked to officials or their proxies, with contractors paid upfront for work that is either poorly executed or never begins.

By the time discrepancies trigger donor inquiries, most funds have been siphoned, leaving stalled infrastructure, ghost projects, and communities with nothing to show for the millions meant to transform their lives.

The Nyamira scandal has particularly angered residents who were counting on the KISIP II project to improve their living conditions in overcrowded and underserved informal settlements.

“We were promised better roads, streetlights, clean water, and proper drainage. Now we hear that the money meant for us has been stolen by the very people who were supposed to help us,” said a resident of one of the targeted informal settlements who requested anonymity for fear of reprisals.

EACC steps in

The EACC has now taken over investigations into the matter, with officials expected to forensically examine bank statements, procurement documents, and payment vouchers to establish the full extent of the fraud and identify all individuals involved.

The commission is also expected to pursue asset recovery proceedings against anyone found to have benefited from the stolen funds.

The KISIP II scandal in Nyamira is the latest in a series of high-profile corruption cases that have plagued Governor Nyaribo’s administration and raised serious questions about oversight mechanisms in county governments handling donor-funded projects.

With the Senate impeachment trial still pending and multiple EACC investigations ongoing, the governor’s political future hangs in the balance as investigators race to unravel the full extent of corruption in his administration and recover millions of shillings stolen from the poor.

For the residents of Nyamira’s informal settlements, the KISIP II scandal represents more than just lost money.