Markets & Finance

IFC now sets aside Sh26.5bn to lend local private firms

IFC

From Left: IFC regional head, East Africa Manuel Moses, IFC director for East and Southern Africa Oumar Seydi and head, investment climate, East and Southern Africa Catherine Masinde during the release of the annual report in Nairobi September 10, 2014. PHOTO | DIANA NGILA

IFC has committed Sh26.5 billion ($300 million) funding for Kenya’s private firms in the financial year starting last June, representing a substantial increase from the previous year’s financing.

In the financial year ended June 2014, IFC committed funding worth Sh18.6 billion ($210 million) to Kenya, representing 40 per cent of the total funding for East Africa.

IFC’s funding commitments in 2013/14 however reflected a reduction from the previous year when its Kenyan funding portfolio stood at Sh39 billion ($500 million) representing 80 per cent of the total for East Africa.

The investment size varies from year to year as some deals initiated in one financial year are eventually closed in the next one.

“What is in our pipeline so far for the year 2014/2015 is about $300 million, but it all depends on the capacity of these projects to meet our standards,” said IFC regional head for East Africa Manuel Moses.

“However, we cannot limit ourselves to a particular number because between now and the end of the financial year there could be more projects in the pipeline, while some of those lined up for this year may not close before July 1 2015.”

The World Bank private sector lending arm mainly invests in infrastructure, agribusiness, health, education and financial services in Africa.

Banks may see more funding from IFC this year following the requirement to increase their capital base, a drive set to consume over Sh70 billion.

Mr Moses said the lender was willing to offer financing to interested lenders with Chase Bank and NIC Bank likely to be early recipients of funding.

Among the financing commitments lined up for the current financial year are loans of $25 million (Sh2.22 billion) to Chase and $20 million (Sh1.77 billion) to listed lender Diamond Trust Bank, where IFC already holds a 4.95 per cent stake.

READ: IFC to inject Sh4bn into DTB, Chase banks

IFC recently took up its allocation in Diamond Trust Bank’s recently concluded rights issue. The IFC has proposed to advance NIC Bank Sh4.8 billion which the bank says it will use to increase dollar-denominated loans as well as boost its capital base.

In the year to June, banks collectively took up the bulk of investments in Kenya at 58 per cent of the total outlay. Some 18 lenders in Kenya have arrangements with IFC.

I&M Bank has received Sh4.32 billion in a loan, and Sh1 billion in trade finance (total $61.8 million) while KCB was advanced Sh1.7 billion ($19.6 million) in trade finance funding.

“We put more into banks because they have wide branch networks, which we can then ride on to ensure that funds reach entrepreneurs especially in the SME sector.

The funding directed towards banks should actually be higher,” said IFC East and Southern Africa director Oumar Seydi.

National Cement was however the single largest recipient of IFC funding in Kenya in the financial year to June 2014 with Sh6 billion ($70 million) coming in equity and loan. Bidco and Garden City received Sh3.2 billion and Sh2.8 billion in investment respectively.

Low cost education provider Bridge International Academies received equity investment of Sh860 million ($10 million), which is being used in an expansion plan that will see it open schools in Uganda and Nigeria.

Other companies that have received funding from IFC in the past two years include Kenya Power, Gulf Power, Electrawinds Kenya Ltd, Kenya Tea Development Authority and Gulf African Bank.

Most of the investments came in form of long-term loans, with IFC acquiring equity in a few firms.

IFC loans have a longer maturity period of up to 15 years compared to those offered by commercial banks that largely have a maturity of around five years.

Equity investments are normally in minority stakes that do not exceed 20 per cent in existing enterprises.