Dutch bank to focus on EAC financial assets

Mr Domenico Fanizza of the International Monetary Fund (IMF). He said the jump in the national inflation, which hit a 15-month high of 8.29 per cent in September, is a result of the VAT Act and should not affect the country’s economic policy unless it persists. PHOTO|FILE.  NATION

By  STEVE MBOGO Special Correspondent

Dutch Development bank FMO, which has most of its investments in Africa, has said it will increase its focus on financial sector assets in the East African region, offering new fundraising opportunities for banks, microfinance institutions and insurance companies.

Ten of the bank’s 21 investments in Africa are in the financial sector.

“Our debt side is looking at opportunities in the financial sector in East Africa. Half of our balance sheet, including the private equity arm, is invested in the financial sector,” said Jorim Schraven, Africa manager for financial institutions at FMO.

The decision to focus on the financial sector is designed to help the region reduce the size of the unbanked population, so as to benefit from the opportunities; nearly 80 per cent of East Africa is unbanked.

In the past week, FMO loaned Bank of Africa Kenya $25 million, repayable in seven years. The bank will use the money to finance small and medium sized Kenyan enterprises.

The financial sector is one of the key beneficiaries of the growing economies of the region. People with higher incomes invest more in financial instruments, seek custody for excess money, increase their savings and also move money more.

The insurance industry in the EAC has maintained double digit growth in the past five years in premiums earned, while microfinance institutions have been going in for branch expansion and investment in technology.

Growing popularity

Assets in the financial sector have remained popular with fund managers, according to the 2013 East Africa Private Equity Confidence Survey by Deloitte and Africa Assets.

“Sectors like financial services, manufacturing, real estate and health care continue to see activity each year, reflecting the consumer-driven focus of many private equity funds. This focus appears to be well placed, as these sectors continue to grow and provide viable deal flow opportunities in many countries,” notes the survey.

“The economic growth outlook for the region is positive and we expect this to sustain the current growth.

“The good thing with the East African economies is that they are diversifying and therefore offering investment opportunities at any time,” said Mr Schraven.

In FMO’s 2013-2016 strategy, it plans to deepen its focus on financial institutions, followed by energy and agribusiness, food and water.

“Instrumental to the success of our new strategy is the choice of countries and sectors in which we operate,” notes the company’s 2012 annual report.