Dutch Private equity fund Oiko Credit has bought 22.8 percent stake in Credit Bank for Sh1 billion.
Last year the lender approved increase of its share capital from Sh5 billion to Sh7 billion as it sought tier II status and has been seeking capital including through a rights issue of Sh2 billion.
Credit Bank CEO Betty Korir said the lender had also raised Sh1.2 billion through private placement as they target closing the rights issue in December.
“The bank is majority-owned by Kenyans, and two British foreign owners,” Ms Korir said of the institution associated with former Finance minister Simeon Nyachae.
Oikocredit Portfolio Director Africa Robert Kagiri said Credit Bank is a good fit for Oiko with its strong SME customer links and financial inclusion.
“By enabling Credit Bank to expand its lending activities to SMEs, we’re helping them support the creation of sustainable jobs. We look forward to working with Credit Bank towards lasting social impact for people on low-incomes in Kenya,” Mr Kagiri said.
Credit Bank intends to use the funding to grow its SME loan portfolio and to further build on the trade finance solutions on offer.
Ms Korir said the lender would leverage on counterparty risk to manage bad loans by assessing companies the SMEs traded with and their ability to pay.
Credit banks bad book stood at Sh1.1 billion in December 2018 up from Sh876 million. The bank’s loan book stood at Sh13 billion at the end of last year up from Sh9.6 billion in 2017
Credit Bank got a shot in the arm after Africa Development Bank recently approved a debt finance facility to further extend its presence in the SME market.
Small lenders have turned to private equity firms to raise capital. They include Prime Bank that got Sh5.1 billion from AfricInvest and Catalyst Principal Partners and Sidian, which got Sh1.2 billion Investment Fund for Developing Countries (IFU).