From left: Gulf African Bank chairman Jamal Al Hazeem, IFC East and South Africa director Oumar Seydi, Finance minister Njeru Githae and Gulf African Bank MD Asad Ahmed during the signing of a partnership deal between IFC and the bank at the Norfolk Hotel in Nairobi on Thursday. Photo/Salaton Njau
What you need to know:
IFC has made a Sh428 million equity investment in Gulf African Bank where it will acquire 15 per cent stake in the pioneer Islamic banker.
The lender will provide a further Sh257 million trade line under the IFC Global Trade Finance Programme.
The International Finance Corporation (IFC) has stepped up investment in Kenyan companies with renewed focus on small and medium enterprises (SMEs) besides the agribusiness and infrastructure sectors.
The World Bank’s private sector lender Thursday made a Sh428 million ($5 million) equity investment in Gulf African Bank where it will acquire 15 per cent stake in the pioneer Islamic banker.
In addition to the equity investment, which is its first in an Islamic lender, IFC will provide a further Sh257 million ($3 million) trade line under the IFC Global Trade Finance Programme.
IFC regional director, East and Southern Africa, Oumar Seydi, said the organisation so far has entered into financing deals with 11 banks and one non-bank institution. He said diversifying its financial sector investments to banks such as Shariah bankers would help connect with more businesses.
The World Bank agency said that small businesses have a huge impact on any economy, noting that in Kenya almost 80 per cent of all jobs are created through SMEs, therefore, the strategic decision to increase funding to the sector through the lending institutions.
“Through our investments and advisory services as IFC, we partner with institutions such as Gulf African Bank to help them enhance their reach in the SME sector,” said Mr Seydi. “We have so far teamed up with 11 banks and one microfinance institution to help them expand their business with SMEs.”
The IFC’s Sh428 million investment will be matched by other Gulf African Bank shareholders through a rights issue, bringing the new capital injection into the bank to Sh850 million.
Gulf African Bank is primarily owned by Gulf and Kenyan based investors, including Istithmar World, Government of Dubai sovereign fund, BMI Bank BSC, Saudi Arabia-based investor Abdullah Mohammed Al Romaizan, Dubai based Gulf Cap Group and PTA Bank.
The bank has announced a 154 per cent increase in net profit for last year. The profit increased from Sh95 million in 2011 to Sh242 million last year, reflecting the direction IFC investment is headed to of late.
IFC has been widely criticised for pursuing profit despite its primary mandate of poverty eradication. Focus on SME though could be argued to be part of that mandate though.
“The financing by IFC will help us expand our services and improve our products to retail customers, women entrepreneurs and SMEs,” said Asad Ahmed, Gulf African Bank managing director.
Recently, it extended a Sh612 million loan to Brookhouse International School in Nairobi to finance the expansion of the school’s facilities in order to double the high-end learning institution’s student capacity.
The agency indirectly holds a stake in the school through its 14 per cent ownership of AfricInvest Fund, which in turn holds 75 per cent ownership of the school.
While commending the move by IFC to make an equity investment in a local bank, Finance minister Njeru Githae called on IFC to make further equity investments in other sectors in the economy and pledged the Treasury’s support for such ventures.
“We have been requesting IFC to invest more equity in our corporations, especially in the energy sector, because we believe this is a sure way of promoting private investment in our country,” said Mr Githae.
Mr Githae played down the need for a special legislative framework to regulate the Shariah banking, claiming that CBK and the Insurance Regulatory Authority were capable of overseeing Shariah banking and Takaful insurance products.
