Jamii Bora Bank CEO Samuel Kimani at a press briefing. Kimani said the rights issue, which is expected to raise Jamii Bora’s capital to above Central Bank of Kenya’s (CBK) minimum requirement of Sh1 billion, will close in two months’ time.
What you need to know:
Jamii Bora has a Sh200 million loan in its balance sheet from the Women Enterprise Fund meant for onward lending to women-owned businesses which it received in February.
SMEP Deposit Taking Microfinance Limited, which is also seeking additional capital through a restricted offer, is also changing its capital mix, which will see it give preference to shareholder funds over debt.
Jamii Bora Bank’s Sh500 million cash call to shareholders is set to open today as the lender seeks capital to meet the minimum statutory requirement. Chief executive Samuel Kimani said the rights issue, which is expected to raise Jamii Bora’s capital to above Central Bank of Kenya’s (CBK) minimum requirement of Sh1 billion, will close in two months’ time.
The lender is short of CBK minimum target by about Sh200 million.
Details on the price of the rights shares, a breakdown of how the funds will be spent and other investor information will be published in the issue prospectus set to be released today.
“We cannot give the price until Monday when the rights issue begins,” Mr Kimani had told the Business Daily in an earlier interview. Jamii Bora is a public, non-listed firm owned by nearly 600 shareholders with about nine million shares.
It was formed in 2010 after the merger of Jamii Bora Microfinance and Citi Finance Bank. Major shareholders include Jamii Bora Scandinavian Group and Messrs Asterisk with a 25 per cent stake each, Jamii Bora Africa Group (12 per cent) and Nodic Micro with a five per cent stake.
The CBK set December as the deadline for banks to comply with the minimum statutory capital requirement.
Mr Kimani said that major shareholders had committed to take part in the rights issue.
The current bank’s core capital stands at about Sh800 million.
In December last year, the microlender concluded a rights issue that raised Sh270 million.
Other banks have recently raised cash for expansion and to comply with the regulator’s capital ratios.
They include Diamond Trust Bank, NIC Bank, CfC Stanbic and Family Bank, which have sold shares through rights issue while Consolidated Bank raised Sh1.7 billion through a bond.
Francis Mwangi, a research analyst at Standard Investment Bank, also said rising demand for long-term loans is pushing banks to seek longer-term shareholder funds.
With more capital, the banks can then seek long-term debt from big lenders such as the International Finance Corporation and other development banks.
Banks also need to increase their level of deposits to remain within CBK capital requirement ratios.
The regulator requires them to maintain an eight per cent minimum core capital to total deposits ratio.
“This ratio does not include any debt, so you will still be required to increase your capital,” said Mr Mwangi.
Jamii Bora has a Sh200 million loan in its balance sheet from the Women Enterprise Fund meant for onward lending to women-owned businesses which it received in February.
SMEP Deposit Taking Microfinance Limited, which is also seeking additional capital through a restricted offer, is also changing its capital mix, which will see it give preference to shareholder funds over debt.
“Majority of the funds will be used to change the financing mix and rely less on debt finance to on-lend to customers,” said the chairman Gabriel Kivuti in a statement.
Proceeds from the Jamii Bora rights issue will also be used for expansion, upgrading its IT infrastructure, corporate and forex lending.
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