Kenya and other regional economies will have to inject Sh4.2 billion in fresh capital into the East African Development Bank (EADB) within the next two years as part of their commitment to the regional lender.
A credit analysis note by rating agency Moody’s says that Kenya being a shareholder has to make good its promise to increase the bank’s capital base. It was not immediately clear what arrears were attributable to each country.
Shareholders agreed to pump in $90 million (Sh7.9 billion) in 2005 over a five-year period but so far only $42 million (Sh4.2 billion) has been paid. Moody’s says that the $58 million (Sh5.1 billion) balance is to be paid by Kenya, Uganda and Tanzania who are the bank’s member states.
“The full amount is to be paid in by 2016 for historical shareholders, and by 2019 in the case of Rwanda,” says Moody’s.
Rwanda joined in 2008 and agreed to pay its share of $22.5 million (Sh1.97 billion) by 2019.
As at the end of December 2013, Kenya and Uganda each had a 27 per cent stake in the regional development financial institution while Tanzania had a 24 per cent stake.
Burundi is the only country in the region that is not a shareholder in EADB but applied for membership. EADB has in recent years gone through a rough patch prompting the recapitalisation.
It was the only survivor when the old EAC collapsed and is viewed as critical to funding capital formation in the region.
Non-state shareholders are African Development Bank, which has an 11 per cent stake, FMO three per cent, DEG and other commercial banks have a one per cent stake each.
The bank is also carrying out a bond programme which will see it raise Sh2 billion by the end of the year, that is part of its Sh10.6 billion programme.
EADB director-general Vivienne Yeda had earlier said that proceeds from the bond will be used to finance projects in agriculture, infrastructure and energy.
The lender joins Housing Finance, Britam, CIC Insurance, NIC and Home Africa as companies that are going to the bond market to look funding in 2014.
Companies are keen to secure medium-term funds in local currencies in which they lend to avoid volatility associated with hard currency injections especially from international financiers.