I&M buys majority stake in Rwanda’s second largest bank

I&M Bank Limited has bought a 55 per cent stake in a Rwandan bank for an undisclosed amount in a deal that underlines the growing trend of local banks seeking a foothold in the regional financial market.

I&M Bank’s principal shareholders — Proparco of France and DEG of Germany — also acquired a combined 25 per cent holding in Banque Commerciale du Rwanda from private equity fund Actis, pushing their total interest to 80 per cent.

Actis bought the 80 per cent stake in Rwanda’s second-largest bank when it privatised in 2004, leaving the remaining 20 per cent in the hands of the government of Rwanda.

Sarit Shah, the executive director of I&M Bank, said yesterday that the deal had been informed by the need to capture and serve the growing number of local firms that are spreading their reach beyond the Kenyan market.

 “We are guided by our customers’ expansion in the region, and this acquisition is no different,” said Mr Shah, adding that the bank is targeting companies in need of cross-border financial services.

The high buy-out prices egged on by increased interest in East Africa from global and Pan African banks has not stopped I&M Bank from deal-making in recent years as it seeks to avoid the challenges associated with start-ups in pursuit of the regional market.

An acquisition provides an easy solution unlike in the case of setting up shop from scratch, which could involve buying land, putting up buildings, hiring staff, seeking regulatory approval, struggling to lure deposits and fighting for market share against established rivals.

In 2008, the bank acquired a 50 per cent stake in Mauritius bank, BankOne Ltd, for Sh1.1 billion and in 2010, it bought a majority stake in CF Union Bank following a complete buyout of the bank by consortium that included Proparco, Mauritius-based private equity Kibo Fund and Michael Shirima, a Tanzanian businessman.

Proparco and DEG jointly owned a 21.7 per cent of I&M Bank before the lender invited 85 new investors last year through a private share sale that raised Sh2.4 billion for expansion.

“The successful equity exit of Actis reflects the investment opportunities that the Rwandan government has helped foster,” said John Rwangombwa, Rwanda’s minister for Finance and Economic Planning.

I&M Bank will join Kenya’s lenders Equity Bank, KCB and Fina Bank that have spread their operations to Rwanda in recent years.

The regional market is generating increased investor interest as the East African Community (EAC) common market takes shape , opening way for the free movement of labour, capital, goods and services in a market of 126 million people.

A growing number of mid-sized firms are lining up to join the likes of East Africa Breweries Limited, Crown Berger and East Africa Cables in setting up operations in the East Africa countries.

Local banks have taken the cue and are establishing deals and opening operations from scratch in an effort to tap into the growing clientele base.
I&M Bank is now looking at making more acquisitions across the East Africa with Uganda its main target.