Djibouti lender acquires Uwezo Microfinance


Central Bank of Kenya. FILE PHOTO | NMG

A Djibouti lender has acquired a 100 per cent stake in Uwezo Microfinance Bank that was founded 12 years ago but has struggled to post profits.

The Central Bank of Kenya (CBK) announced on Thursday that Djibouti’s largest lender by branch network, Salaam African Bank (SAB), completed the transaction on March 25, 2021.

The regulator did not disclose how much the Djibouti lender paid to the owners of the micro-financier.

“This follows CBK’s approval on December 24, 2020 under Section 19(4) of the Microfinance Act and approval by the Cabinet Secretary for the National Treasury and Planning on January 12, 2021, pursuant to Section 19(3) (b) of the Microfinance Act,” CBK said in a statement.

“CBK welcomes this transaction which will strengthen the business model of Uwezo MFB and enhance the resilience of Kenya’s microfinance banking sector.”

The Islamic lender, which holds 30 per cent of the total bank accounts in Djibouti, has a presence in Ethiopia through a representative office and in Kenya through an investment bank licensed by the Capital Markets Authority.

Uwezo microfinance was founded in 2008 and was licensed by CBK on November 8, 2010 as a community microfinance bank carrying out business in Starehe Division of Nairobi County.

The micro-financier was granted approval to upgrade to a nationwide microfinance bank in December 2015.

Uwezo MFB had a market share of 0.45 percent of the microfinance banking sector and was ranked 10 out of 14 MFBs as at March 31, 2021.

Microfinance banks are struggling to keep customers as large banks and digital lenders raid their turf through innovative products, leaving them with piling losses and diminishing capital.

The 14 CBK-regulated microfinance banks posted a Sh1 billion loss in the 12 months to June—an increase from Sh0.7 billion loss that was recorded in a similar period the previous year.

Between 2015 and 2019, microfinance banks’ active loan accounts have shrunk by 78,700 or 23 percent to a record low of 263,300. They had about 600,000 loan accounts a decade ago.

Recently, US-based digital lender Branch International was cleared to acquire 84.89 percent stake in loss-making Century Microfinance Bank in a deal estimated at  Sh230 million.

SMEP Microfinance bank is also searching for a strategic investor to inject in fresh capital for funding growth on the back of cumulated losses hitting Sh292.89 million.

Diaspora-backed Choice microfinance bank has since 2019 been looking for a strategic investor to buy a majority stake as it seeks fresh capital to finance expansion and boost lending capacity.

Key Microfinance Bank, formerly Remu, is also in search for a strategic investor with talks now believed to be at the tail end.

PAYE Tax Calculator

Note: The results are not exact but very close to the actual.