A lady uses a DTB teller machine. The listed lender’s subsidiaries in
Tanzania and Uganda will get a combined Sh4.3 billion to shore up loans.
File
Nation Media Group
By JOHN GACHIRI
In Summary
- Credit expected to enable subsidiaries lend to small firms and strengthen capital base.
- IFC has sunk billions of shillings in the Kenya financial sector which has been growing over the last decade.
IFC will invest $50 million (Sh4.3 billion) in DTB’s Uganda and Tanzania subsidiaries to strengthen capital bases and increase lending to small businesses.
IFC, the World Bank Group’s private lending arm,
says it plans to invest the money through a long-term loan or tier II
capital, which banking regulators accept as capital.
“The subordinated loan will be utilised to
strengthen Diamond Trust Bank Tanzania Limited’s capital base and assist
in DTBT’s increase in lending to the SMEs,” says the disclosure note
for DTB Tanzania.
The note on the DTB Uganda proposed investment states the same.
The note on the DTB Uganda proposed investment states the same.
IFC has sunk billions of shillings in the Kenya financial sector which has been growing over the last decade.
The latest move means the lender has plans to
invest $150 million in DTB Group after an earlier disclosure of plan to
invest $50 million in DTB Kenya through a similarly structured long-term
loan also qualifying as tier II capital.
All the proposed loans will increase the fast-growing banks’ capital and give headroom to accept deposits, which originate loans, and then increase lending to SMEs.
DTB and the IFC have lately committed to aggressively invest in the region’s SME sector that is also the target of other Kenyan banks.
“To date, IFC’s investment and advisory services
have partnered with 11 banks and one microfinance institution in Kenya,
to help them sustainably increase business with small and medium
enterprises,” said the IFC when it made an Sh850 million investment in
Gulf African Bank a week ago.
DTB chairman Abdul Samji has in the past said that
funding start-ups will be a major focus for the listed bank. Analysts
said that the heavy IFC investment in banks achieve good rate of return
for the lender’s investors while boosting economic growth.
The lender has lately been criticised for focusing on returns instead of the core mandate of poverty eradication.
The IFC has a 9.8 per cent stake in DTB entitling
it to the Sh1.9 per share proposed dividend after the bank’s net profit
increased by 36.6 per cent to Sh3.62 billion from Sh3.06 billion in
2011.
This was aided in part by profits from its regional subsidiaries which have proven a trustable growth driver for Kenyan banks.
This was aided in part by profits from its regional subsidiaries which have proven a trustable growth driver for Kenyan banks.
Eric Musau, a research analyst at Standard
Investment Bank, said that banks catalyse economic growth and by making
it easier for them to lend, the domino effect is growing businesses
justifying IFC’s investing in commercial banks.
“Once the banks have money they can then give
credit to businesses,” said Mr Musau. The IFC’s choice of investing in
regional banks with headquarters in Nairobi is influenced by Kenya
having a more developed banking industry. “These (regional) markets do
not have a very well developed banking capacity,” added Mr Musau.
KCB, the region’s largest bank, is also set to receive a $150 million (Sh12.9 billion) loan from the IFC
for onward lending to small businesses and has previously been an agent
for IFC’s lending to Rwandese firms. The IFC injected Sh450 million in
KCB Rwanda in mid-2011
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