Bank of China eyes project financing with Nairobi office

The Central Bank of Kenya has approved set-up of the Chinese bank in Nairobi. Photo/FILE
The Central Bank of Kenya has approved set-up of the Chinese bank in Nairobi. Photo/FILE 

The Bank of China has received the green light from the Central Bank of Kenya to set up a representative office in Nairobi.

The move is aimed at easing the flow of Chinese loans to East Africa and as a first step towards opening a fully-fledged commercial bank.

Bank of China, which is majority owned by the Chinese Sovereign Wealth Fund and the world’s fifth largest company, will market the products of its parent company in Beijing with focus on investment banking, corporate banking and asset financing.

It hopes to get a piece of the rising trade between Kenya and China that has increased from Sh55 billion in 2007 to Sh148 billion last year with its focus on the region’s infrastructure projects—which are mainly handled by Chinese firms.

The Bank of China is the first Chinese bank to open shop in Nairobi and fifth foreign bank to open a representative office in Kenya after HSBC, FirstRand, Nedbank and HDFC Bank.

“BOC’s representative office will market the products and services of Bank of China Ltd to existing and prospective customers in Kenya and the East African region,” said the central bank in statement on Tuesday.

“Bank of China Ltd seeks to explore potential business opportunities in the country with a view to evaluating the prospects of a long-term presence in Kenya and the wider East African region.”

South African lender FirstRand—which was licensed to operate a representative office last November—announced plans to acquire a mid-sized Kenyan bank in May at the official launch of its Nairobi office.

Foreign lenders have been looking to set up operations in Kenya whose industry’s profit jumped 20.4 per cent last year to Sh89.3 billion on increased lending.

In Africa, the Bank of China is in South Africa and Zambia among the 27 countries that it operates in globally—making it the most international bank in China.

Its entry in Nairobi comes at a moment when Chinese organisations like State broadcaster CCTV and Huawei are eyeing Nairobi as launch pad to the East African market, especially after the formation of the region’s common market.

The integration will create a market of about 126 million persons and allow for free movement of factors of production, goods and services among the five East Africa Community member states.

The Nairobi office marks a shift in strategy for the Chinese bank, which initially had preferred to form partnership with African financial institutions including seconding staff to assist its customers in the continent.

In 2009, it entered into a pact with Ecobank, where the Chinese bank has been seconding staff to work in banks owed by the Togo-based lender, which operates in 31 African countries.

Chinese firms are building airports, roads and power plants across Africa and they have emerged as sought-after clients for lenders like the Bank of China, Export-Import Bank of China and South Africa’s Standard Bank.

Standard Bank is owned 20 per cent by China’s Industrial & Commercial Bank of China (ICBC Bank)—which is the world’s most profitable lender and the second largest global firm, according to Forbes.

Bank of China, which is ranked the third largest bank globally by Forbes, will be eyeing deals in infrastructure and mining sectors in East Africa.

The two sectors are in need of multi-billion shilling investments that are beyond the lending capacity of local banks, paving the way for foreign banks like Standard Bank, Standard Chartered Plc and Cairo-based Afreximbank.

For instance, the Kenya Petroleum Refineries Ltd last month secured a Sh21.2 billion loan from Standard Chartered Plc.

It will be seeking to cut the dominance of China Development Bank and Export-Import Bank of China—which have front run other Chinese banks in Africa.

Kenya has also witnessed increased activity from Chinese investors that fits in well with President Kibaki’s government policy to look east for investments and aid as traditional partners like Western Europe and US become more tight-fisted.

It has opened its markets to Chinese goods as shown by mushrooming of China products in Kenya’s major urban centres.Kenya has also signed deals with Chinese firms ranging from oil explorers, miners to infrastructure developers.