Private equity firm LeapFrog Investments has set aside a chunk of the recently raised Sh35 billion for investing in Kenyan banks, insurance and other financial services firms.
The firm said it is looking for companies dealing with savings, pensions, investments, credit, remittances or payments to invest Sh9 billion ($100 million) in.
LeapFrog Fund II raised $400 million (Sh35 billion) from development financiers CDC, DEG, EIB and FMO, global insurance companies, pension funds and asset managers.
The firm did not indicate any specific target of interest but mentioned it is willing to invest as much as Sh4 billion per company.
Dominic Liber, a partner at LeapFrog, said the target companies must be fast growing and able to serve middle-class consumers.
“We will be looking to invest in financial services businesses with strong management teams, an appetite for growth and profitability and a focus on the emerging consumer,” Mr Liber said in a statement.
The firm has already invested locally through an equity stake purchase in Apollo Investments Ltd in 2011.
Apollo chief executive Ashok Shah said so far his firm has used Leapfrog’s expertise in emerging markets to expand insurance business to the lower end of the market.
“Their experience and global reach have helped us penetrate new markets, most notably, offering services to the financially excluded,” said Mr Shah in a statement.
Analysts said banks are preferable investment candidates in the financial services due to higher returns and lower risk compared with insurance firms.
Agnes Achieng, a research analyst at Sterling Capital, said rising claims in particular have an impact on profitability but noted there is still opportunity for increasing business given the low insurance penetration.
LeapFrog has also invested in insurance companies in Nigeria, Ghana and South Africa.
Other private equity firms that have invested in insurance firms include African Development Corporation (ADC), which has a 38.74 per cent stake in Resolution Health.