Equity Bank to acquire 79pc stake in DR Congo microlender

Equity Bank chief executive James Mwangi at a past function in Nairobi. PHOTO | FILE 

By JAMES ANYANZWA, The EastAfrican

In Summary

• Equity Bank said it would invest $60 million in the bank to open up new branches and delivery channels.
• Equity Bank is buying the stake from development finance institutions that are exiting the bank after the end of their investment timeframe.
• Industry sources said Equity Bank has already received approval from the Kenyan regulators to go ahead with the transaction.
• DRC has a steadily growing financial sector but the formal banking services remain out of reach for most of the population.

Kenya’s Equity Group Holdings has announced intentions to take a controlling stake in ProCredit, a microfinance bank in the Democratic Republic of Congo.

Equity Bank will acquire a 79 per cent controlling stake in PCB bank subject to regulatory approvals.

“Equity Bank has already issued a cautionary statement to the Capital Markets Authority expressing its intention to acquire this microfinance bank and they have already received the approval,” said a source.

According to its annual report for 2010, the paid up share capital for ProCredit Bank was $16 million. That would put the nominal value of the stake Equity Bank is acquiring at least $12.64 million.

However, Equity Bank said it would invest $60 million in the bank to open up new branches and delivery channels.

Equity Bank is buying the stake from development finance institutions that are exiting the ProCredit after the end of their investment timeframe.

The acquisition fits in with the bank’s growth and expansion strategy in the wider East and Central African region.

READ: Equity Bank builds $227m war chest for Africa buyouts

If successful the acquisition will give Equity Bank a foothold in the mineral rich but weak and volatile economy of Congo which have suffered perpetual wars over the control of resources estimated at $24 billion.

DRC, Africa’s second largest economy, holds some of the richest mineral deposits in the world including diamond, gold, tin, copper and oil.

Industry sources said Equity Bank has already received approval from the Kenyan regulators to go ahead with the transaction.

The deal will see several equity investors exit ProCredit Bank, except the Germany Promotional Bank KfW which holds 12 per cent stake in the bank and IFC which has a nine per cent shareholding.

Equity Bank’s stock at the Nairobi Securities Exchange (NSE) was trading at Ksh48 ($0.49) per share before the material announcement.

The Kinshasa-based ProCredit Bank was founded in 2004 and operates as a subsidiary of ProCredit Holding AG of Germany. The bank focuses on serving very small, small and medium businesses, as well as private individuals and low-income households.

Equity Group which cross-listed on the Rwanda Stock Exchange (RSE) in February this year aims at becoming a Pan-African bank with presence in over 15 countries across the continent leveraging on the use of technology to enhance non-interest income.

Equity is seeking to take advantage of the transactions market through the mobile banking platform which has seen the bank acquire a Mobile Virtual Network Operator (MVNO) license and partner with Airtel.

READ: Equity-Airtel deal steals Safaricom’s thunder with money-transfer platform

Apart from Kenya, the bank has presence in Uganda, Tanzania, Rwanda and South Sudan.

Equity Bank is listed on the NSE, Rwandan bourse and the Uganda Securities Exchange (USE).

The bank’s first quarter (January-March 2015) pre-tax profits grew 13 per cent to $62.88 million up from $55.67 million in a similar period last year, buoyed by Equity’s diversification strategy.

Its total operating income surged 19 per cent to $136 million from $114.43 million while expenses grew 24 per cent to $73.19 million on the back of investments made information technology expansion in 2014.

DRC has a steadily growing financial sector but the formal banking services remain out of reach for most of the population.

The demand for accessible, transparent and responsible financial services is therefore very high.

ProCredit Bank Congo is a member of the ProCredit Group, which is led by its Frankfurt-based parent company, ProCredit Holding.

ProCredit Holding is the majority owner of ProCredit Bank Congo and holds 61 per cent of the shares.

ProCredit Bank Congo was founded by an alliance of international development-oriented investors, many of whom are current shareholders in ProCredit Holding.

Other ProCredit Bank Congo owners are listed as DOEN Foundation of Netherlands with 12 per cent and Belgian Investment Company for Developing Countries with 6 per cent while other investors hold 1 per cent stake.