Jamii Bora Bank gets Sh200m loan from women’s fund

Jamii Bora Bank has obtained a Sh200 million loan from the Women Enterprise Fund (WEF) for onward lending to women-owned businesses. The move is set to intensify competition for customers in the microfinance segment.

Along with the credit facility, the bank ranked as the smallest in the country by asset base, has announced plans to raise Sh200 million through a rights issue by September whose proceeds will help shore up its capital base.

The microfinance institution has lately stepped up expansion plans and is in the process of converting 12 of its outlets into fully-fledged bank branches within the year in a scramble for the bottom end of the market. Chief executive Samuel Kimani said Thursday that the credit line from WEF will boost Jamii Bora’s lending kitty, as it seeks to position itself as the micro-lender at the grassroots level. “The bank is seeking to grow its presence at the bottom end of the market by offering products for the low-income group that other players have not developed,” Mr Kimani said, adding that loans will be secured.

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Jamii Bora, which was until two years ago operating as a microfinance institution, has only one branch but is relying on its over 40 outlets to reach customers, mostly individuals working in the informal sector and small business owners.

The WEF loan will attract a one per cent interest while the eventual borrowers will pay eight per cent interest, where the difference will cover for the bank’s margins and operational expenses. Mr Wainaina wa Njeri, the chief executive at WEF, said that the agency was acting as a wholesale lender — a model that cushions it against default risk which currently stands at 24 per cent. “The average countrywide repayment rate is at 76 per cent, but we are certain that all monies lent through the intermediaries will be fully recovered,” said Mr wa Njeri. WEF was established in the run-up to the 2007 General Election to promote enterprise among women.

Capital

Mr wa Njeri said WEF was seeking to become self-sustaining by eliminating bad debts in what would eventually eliminate State funding.

Jamii Bora is one of the 105 intermediaries whose network the fund will depend on to reach the target market with loans ranging from Sh500 to Sh500,000.

In the planned rights issue the bank, which was formed after the merger of Jamii Bora Microfinance and Citi Finance Bank in 2010, will seek to increase core capital to Sh1 billion as required by the industry regulator by December 31, from the current Sh800 million. Mr Kimani said that major shareholders have committed to take part in the rights issue, which is the second in as many years.

The initial cash call concluded in September last year raised Sh270 million. The bank also attracted new investors, Messrs Asterisk Holdings, a consortium of local investors who include the chief executive and Timothy Kabiru, its chief operations officer.

The pair, formerly executives at KCB, is leading the transformation of the lender as it seeks to shed its loss-making tag.

Some of the major shareholders of the bank include Jamii Bora Scandinavian Group, which has a 25 per cent stake, Messrs Asterisk with 25 per cent, Jamii Bora Africa Group 12 per cent, and Nodic Micro with five per cent.