Sumac secures $1 million loan as it prepares for cash call

Sumac chairman Kibatha Njoroge. PHOTO | FILE 

By JOHN GACHIRI

In Summary

• The three-year loan is part of the micro-lender’s capital raising strategy that includes getting funds from its shareholders.

Sumac Microfinance Bank has secured a $1 million (Sh100 million) loan from a European investment firm for onward lending to small businesses.

The cash was loaned by the Regional Investment Fund for Micro, Small and Medium Enterprises in sub-Saharan Africa (Regmifa), a Luxemburg-based fund that invests in small lenders in sub-Saharan Africa.

The three-year loan is part of the micro-lender’s capital raising strategy that includes getting funds from its shareholders.

“The loan is to boost our working capital but we are also planning to have a cash call from our investors,” Sumac chairman Kibatha Njoroge told the Business Daily.

The additional capital is expected to increase the lender’s loan book to Sh500 million by the end of the year from the current Sh450 million.

READ: Sumac seeks Sh600m from private equities

Mr Kibatha said the lender seeks to issue loans to micro and small businesses looking to borrow between Sh300,000 and Sh1 million and in need of fast access to credit.

Regmifa had loaned Kenyan micro lenders $8.8 million (Sh880 million) as at September 2014.

The Grameen Crédit Agricole Microfinance Foundation also based in Luxembourg has similarly loaned Kenyan microfinance institutions. In January, Grameen loaned Juhudi Kilimo $550,000 (Sh55 million) for onward lending to borrowers in the agricultural sector.

Micro-lenders are increasing their capital in response to the growing demand by small businesses for fast credit with less stringent requirements than mainstream commercial banks.

Previously Sumac had said it planned to raise as much as Sh500 million for loan book and branch expansion.

Kenya’s microfinance industry which has been growing in double digit rates is expected to continue growing since there is still a large unbanked population.

“More people are now accessing and using financial services and products by different providers. This space presents an opportunity for growth as the countries moves toward more financial inclusion,” the information memorandum on Real People’s bond.

Real People recently raised Sh1.63 billion through a commercial bond that was listed on the Nairobi Securities Exchange while Speed Capital signed a deal with Equity Investment Bank that would see the micro-lender raise Sh2 billion over the next three years.

County Capital, Lions Capital, Remu DTM, Choice, U&I Microfinance Bank, Samchi Credit, Platinum Credit are some of the other lenders playing in this niche market.