SMEP seeking nod to search for investor as losses mount

SMEP Microfinance bank is seeking shareholder approval to sell a stake to a strategic investor as it searches for capital for turnaround efforts after its accumulated losses hit Sh292.89 million.

The microfinance has invited shareholders to an annual general meeting on Friday with the owners expected to vote on the sale of an undisclosed stake to an equity partner.

The lender says it has faced capital and liquidity challenges over the last decade, making it difficult to invest in new business models to meet the changing customer preferences.

“The board has made a strategic decision to go to the market for additional long-term funds to support your bank’s growth plans over the coming years and strengthen its capital base,” said the lender in a notice to shareholders.

The search for new capital comes on the back of the micro-financier having posted a Sh68.75 million loss at the end of last year from Sh6.27 million net profit in the preceding similar period.

Its core capital dropped by 55 per cent to Sh147.28 million last year, leaving it in breach of two capital-linked regulatory ratios.

SMEP currently has 108.595 million issued shares of Sh5 per value each and the board is offering new 110 million shares to be taken up by a single investor or several investors.

The board will be seeking shareholder’s nod to create the new shares and that will be sold to equity within three years from the approval date.

The board wants money from the strategic shareholders to help the lender increase its core capital, expand the branch network and increase the loan book.

SMEP was founded by the National Council of Churches of Kenya (NCCK) in 1975 and received a deposit-taking microfinance licence in 2010.

The NCCK has been shedding off some shares to get to the 25 per cent threshold as required by the Central Bank of Kenya regulations.