Money Markets

Jamii Bora Bank targets mid-tier status in upgrade

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 The founder of Jamii Bora microfinace, Ingrid Munro (left),  joins  dancers during the official opening of the Nyeri branch  in 2009. The bank converted from a microfinance institution last year.

The founder of Jamii Bora microfinace, Ingrid Munro (left), joins dancers during the official opening of the Nyeri branch in 2009. The bank converted from a microfinance institution last year. 

By George Ngigi

Posted  Tuesday, December 6   2011 at  19:25

Jamii Bora Bank will upgrade 11 of its outlets to Central Bank’s specifications for full branches next year in a bid to achieve mid-tier lender status.

The bank-—which converted from a microfinance institution last year—will be making a Sh200 million cash call on its shareholders to finance the upgrade and also meet Central Bank of Kenya (CBK’s) minimum capital requirement of Sh1 billion.
Chief executive Samuel Kimani said in an interview yesterday the upgrade of 11 out of its 45 outlets will cost Sh55 million.

The outlets were part of the infrastructure used by Jamii Bora Microfinance before it was bought out by Citi Finance Bank.
“It will help us to scale up quickly to a middle-tier bank serving the lower-end market,” said Mr Kimani.

CBK classifies Kenyan banks according to small, mid-tier and large based on their assets, deposits, capital size, number of deposit and loan accounts.

Jamii Bora bank has over 300,000 customers but has only one deposit taking branch—while the others are sales outlets from which customers open accounts and fill in loan application forms.

Deposits mobilised from the clients, who operate in groups, are held in an account with other commercial banks, an arrangement that denies Jamii Bora transaction commissions.

In the nine months to September the bank reported Sh2 million earnings from fees and commissions.

It plans to have converted the branches by end of July next year. Construction of branches is an expensive venture necessitating the Central Bank to introduce the agency model to eliminate costs.

Latest capital injection by the new investors– Messrs Asterisk Holdings— combined with a rights issue of Sh270 million concluded at the end of September has given the bank the impetus to expand. If approved in an Extra ordinary general meeting scheduled for December 15, the capital by Messrs Asterisk will see the bank’s core capital rise to Sh800 million, surpassing the statutory requirement of Sh700 million set by the Central Bank of Kenya for end of year 2011.
This will still be lower than the Sh1 billion required by the industry regulator by end of 2012.

“We have strong shareholders and so raising Sh200 million should not be a difficult task. We were at Sh230 million at the close of last year,” said Mr Kimani.

Some of the major shareholders of the bank include Jamii Bora Scandinavian group which has a 25 per cent stake, Messrs Asterisk with 25 per cent, Jamii Bora Africa Group, 12 per cent and Nodic Micro with five per cent.

Some of the outlets which will be converted to full-fledged branches are Kikuyu, Mwingi, Huruma and Eastleigh. Jamii Bora is also seeking to be included in the Kenswitch network allowing access of ATM services to its account holders.Mr Kimani points out that the bank intends to maintain a lean structure to control staff costs.

“In this period of turn-around and growth we have to ensure there is no duplication of tasks-and this is a small bank,” said Mr Kimani.

gngigi@ke.nationmedia.com