NAIROBI, Kenya, Mar 7 – Sidian Bank has signed a deal with The Investment Fund for Developing Countries (IFU), a Danish Development Finance Institution (DFI) that will see the bank receive $12 million (Sh1.2b) Tier 2 capital injection as part of the broader initiative to grow the bank to Tier 2 status.
The funds are expected to boost the bank’s regulatory capital ratios as it works towards achieving its strategic objective of becoming a Tier 2 bank by 2022.
The shareholders of the bank approved a rights issue of Sh1.5 billion and a tier 2 capital raise of Sh1.2 billion, which in combination will support growth of the bank’s assets by an additional Sh10 billion to Sh35 billion.
As part of the agreement, IFU will have the option within the first three years, to convert their investment into equity, subject to Central Bank of Kenya (CBK) approval.
Sidian Chairman James Mworia said the funds will be used to enable the bank further its mission to empower entrepreneurs through the strategic growth of its loan book with a key focus on the SME loan book, trade finance portfolio and mobile lending.
“This is a major vote of confidence in Sidian Bank and its strategic initiatives by an institutional investor with significant investments in financial services companies across the globe. In addition, IFU will serve on the board of the bank, and we look forward to leveraging their breadth of experience in the financial services sector,” said Mworia.
The bank’s CEO, Chege Thumbi, further said the funding comes at a time when the bank has intensified accelerated growth with an aim of achieving its 5-year strategic goals.
“With this investment, the bank will be well capitalized with high liquidity, offering ease of access to funding, financial backing and fast turn-around times for our SME customers and by extension position us as the bank of choice for SMEs and entrepreneurs,” said Thumbi.
Morten Elkjaer, IFU Vice President, said the investment in Sidian Bank is the first investment to unfold the organisation’s new strategy to support more financial institutions with an SME focus.
The bank’s net loan book grew from Sh11.4 billion as at December 2017 to Sh13.1 billion as at 30th September 2018, and the Trade Finance portfolio recorded significant growth from Sh6.6 billion as at December 2017 to Sh14.2 billion as at 30th September 2018.