IFC now invests Sh39bn in leading Kenyan companies
IFC East and Central Africa director Oumar Seydi during a media briefing on the performance of the financial institution. Photo/Diana Ngila
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The investments were made in the year ended June and represent a 27 per cent increase compared to the Sh31.1 billion that the IFC invested in local firms a year earlier.
"Our investments in Kenya have risen substantially and this shows our confidence and commitment to this market,” said Oumar Seydi, IFC’s director for eastern and southern Africa.
Some of the companies receiving debt and equity financing from IFC in the period were Kenya Power, Gulf Power, Electrawinds Kenya Ltd, Kenya Tea Development Authority and Gulf African Bank.
Kenyan companies have chalked up Sh39.6 billion in debt and equity financing from the International Finance Corporation (IFC) as the World Bank private sector financing arm steps up local investments.
The investments were made in the year ended June and represent a 27 per cent increase compared to the Sh31.1 billion that the IFC invested in local firms a year earlier.
Some of the companies receiving debt and equity financing from IFC in the period were Kenya Power, Gulf Power, Electrawinds Kenya Ltd, Kenya Tea Development Authority and Gulf African Bank.
Most of the investments are in form of long-term loans, with IFC acquiring significant stakes in a few firms.
The expansion of IFC’s activities in the local market has seen companies benefit from relatively easier access to long-term finance to fund their growth. Its cumulative investments in Kenya stands at Sh130 billion, making it one of the largest foreign institutional investors in the country alongside European Investment Bank and sovereign funds Proparco (French) and KfW (Germany).
“Our investments in Kenya have risen substantially and this shows our confidence and commitment to this market,” said Oumar Seydi, IFC’s director for eastern and southern Africa.
He said that IFC is likely to match the level of investment it made in the country in the year ended June, adding that Kenya is among the African countries generating high returns on investment amid economic boom.
Mr Seydi noted that the international financier has disbursed long-term loans to 18 local banks for onward lending. Among the lenders that have received loans from IFC are Housing Finance (Sh1.3 billion) and Gulf African Bank (Sh435 million).
IFC’s loans are seen as helping to address the problem of unreliable and short-term funding offered to banks by retail and wholesale depositors.
Analysts say that while IFC loans are priced based on the prevailing market rates, the biggest advantage is saving banks the time and costs of seeking international financing directly.
“Administratively, the IFC loans are cheaper compared to seeking long-term loans denominated in the major world currencies,” said Robert Bunyi, an analyst at Mavuno Capital.
Among non-financial firms, electricity distributor Kenya Power received one of the biggest loans at Sh4.3 billion. The company will use the cash to recruit an additional 500,000 customers by 2014 through expansion of its infrastructure.
The international financier has also taken up significant equity stakes in several local firms seeking capital for expansion in the local and regional market.
IFC recently acquired an undisclosed stake in healthcare provider AAR for Sh348 million, used by the firm to expand its services in Kenya, Uganda, and Tanzania.
“AAR will expand operations and acquire new hospitals in Nairobi, Kampala and Dar es Salaam,” IFC said in a statement. The financier has also joined the shareholder list of Electrawinds Kenya Ltd where it invested Sh261 million to fund the company’s wind power generation project in Lamu.
The project is expected to start next year and will generate an estimated 90 megawatts of electricity, helping to reduce the country’s energy deficit that necessitates the use of expensive emergency thermal power plants.
IFC made one of its rare equity investment in a bank earlier this year with the acquisition of a 15 per cent stake in Gulf African Bank (GAB) for Sh435 million. GAB is an Islamic bank which started operations in 2008 and has started making profits.
Its only rival in the niche is First Community Bank. GAB is planning to expand into the East African market in the medium term in a move that will see it join top rivals KCB and Equity Bank that pioneered the regional banking strategy.
