Dutch investor Oikocredit injects Sh100m into micro-lender U&I

U&I Microfinance Bank has secured a $1 million (about Sh103 million) loan from the Dutch social impact investor Oikocredit for lending to small business.

Oikocredit Investment manager Caroline Mulwa said the facility would uplift U&I Microfinance Bank’s lending to the small enterprises in the City.

“This loan will enable U&I expand its lending activities, by providing its clients with access to finance, and creating a sustainable impact for people on low incomes."

Small firms have witnessed credit rationing since the onset of interest rate controls as banks perceive them high risk.

U&I Microfinance Bank, one of the 13 Microfinance Banks licensed and regulated by the Central Bank of Kenya (CBK), was established in 2007 as a credit only institution. It has five branches—two in Nairobi’s bustling Gikomba market, one in Nairobi’s River Road and another one in Thika. The micro lender granted a licence in 2013 mainly finances micro and medium businesses. “The credit line will enhance and uplift our lending to the small enterprises and help give the local economy an extra boost,” said U&I Microfinance Bank chairman Muturi Kamande during the signing ceremony. “Our plan is to expand and have a foothold in every county in five years,” he said. Big banks and micro 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).

Kenyan banks have also in recent years taken substantial loans from global funds, including the International Finance Corporation, European Investment Bank, Agence Française de Développement and the African Development Bank, attracted by relatively favourable terms of debts like lower interest rates and longer maturity.

Co-op Bank, KCB and Equity are among lenders that have borrowed from international financiers to fund long-term lending business.