Family Bank receives Sh1bn funding from Dutch firm for SMEs

Family Bank has received a Sh1 billion loan from Netherlands-based Oikocredit for lending to small and medium-sized businesses.

The bank has recorded rapid expansion of its loan book, 39 per cent in the nine months to September, informing its management’s move to seek cheap funding from international lenders such as Oikocredit, European Investment Bank and Africa Development Bank.

“There’s increased demand of financial services by SMEs and we can only address this if we are innovative and have the capacity to address their growth needs,” said Family Bank chief executive Peter Munyiri.

The loan will, however, not be used to finance working capital or refinancing of existing debt.

“This is our biggest deal in Africa,” said Oikocredit country manager Caroline Mulwa.

The bank has deployed a multi-pronged capital raising strategy — a mix of both debt through a corporate bond and sale of equity to international lenders. It raised Sh2 billion through the first tranche of its Sh10 billion bond issued in October.

Family Bank had hoped to raise Sh4 billion from the bond but its performance was affected by high yields offered by the Treasury and collapse of Imperial Bank during the same month after raising Sh2 billion through a corporate bond.

Family Bank was offering a return of 13.75 per cent for the five-year bond when short-term yields from government securities shot over the 20 per cent mark.

The bank plans to raise the deficit of Sh2 billion, from development finance institutions whose loans are advanced in dollars and at a cheaper cost than the locally issued bond.

Part of new funds sought by Family Bank are earmarked for lending activities as well as funding expansion of its branch network.

It recently opened the 88th branch in Maua with three more branches set to open in Wote, Kahawa West and Mlolongo this week.