Capital Markets

Equity eyes small firms with PE, venture capital fund plan


Equity Centre in Nairobi upperhill. FILE PHOTO | NMG

Equity Group’s #ticker:EQTY investment banking arm is planning to set up venture capital and private equity funds to drive investment in ICT and small enterprises in Kenya and the region.

The group’s chief executive officer James Mwangi said the move was informed by the company’s realisation that there is still high unmet demand for financing innovation in developing countries such as Kenya.

He made this disclosure in an article he wrote for the Global Innovation Index 2020, which is co-published by the World Intellectual Property Organisation (WIPO), Cornell University of the US and non-profit private university INSEAD.

“Equity Investment Bank (EIB) is expected to grow as Kenya and other African economies shift from low-income to lower middle, upper middle, and, eventually, high-income economies. This will see the bank launch private equity and venture capital funds to offer equity investments for innovators and micro, small and medium sized enterprises (MSMEs),” said Mr Mwangi in his paper on financing innovation in Kenya .

“The group’s fintech arm, Finserve, is expected to set up a fund to invest in innovative ICTs for the development start-up sector providing digital solutions to Africa’s most pressing problems.”

He, however did not disclose the timelines of the new funds.Small and medium sized enterprises account for 60 per cent of the lender’s loan book of Sh454 billion, with Equity now set to pump in more funds into young businesses through direct investment.

The move by the holding company to set up investment funds through EIB signals a shift in banks’ use of their investment arms, which many of them acquired or set up between five and 10 years ago with an eye on income from stock and fixed income trading.

Equity set up EIB after acquiring the trading licence of the collapsed stockbroker Francis Thuo & Partners in 2013, for a reported Sh150 million, hoping to leverage on its large bank customer base to drive business to the unit.