Victoria Commercial Bank (VCB) has received a follow-up financing of $7.5 million (Sh969 million at current exchange rates) from Swedish development finance institution Swedfund to support its lending to small businesses in Kenya.
The new facility follows a $5 million (Sh502 million at the time) loan the Tier 3 bank received from the Swedish lender in 2018, which helped it build its capital and boost lending to local small and medium-sized enterprises (SMEs).
Swedfund's investment director, Jane Niedra, said the new loan will help increase access to affordable finance for SMEs in Kenya, supporting job creation and poverty reduction in the country.
“Small and medium-sized enterprises are the backbone of economies, employment and innovation. With this second loan, we want to deepen our impact and enhance their capacity to support even more businesses,” said Ms Niedra.
Yogesh Pattni, CEO of Victoria Bank, said the new funding would enable the lender to "better support our SME clients and contribute to sustainable economic development" in Kenya.
According to Swedfund, VCB used the first tranche of the loan to develop an environmental and social management system to manage sustainability risks, develop an environmental, social and governance (ESG) risk assessment framework and train its staff.
The new funding, which will boost VCB's capital, comes at a time when new regulations require local banks to increase their core capital to at least Sh10 billion by the end of 2029, up from the current threshold of Sh1 billion.
Victoria Bank is one of the 24 lenders with core capital of less than Sh10 billion as of September 2024.
The Central Bank of Kenya recently asked the lenders to explain their plans to raise capital to the required threshold.
Victoria Bank's core capital stood at Sh7.55 billion as of the third quarter ending September 2024, and the additional funding from Swedfund is expected to take it above the Sh8 billion mark – the minimum core capital required before 2028, according to the CBK's timeline for reaching the Sh10 billion threshold by 2029.
VCB is one of the most profitable Tier 3 banks in Kenya. In the nine months to September 2024, it made a net profit of Sh425.8 million.
