Key Microfinance Bank, formerly Remu, is seeking Sh276.6 million injection after auditors cast doubt on its ability to continue in business without getting fresh capital.
The microlender wants existing shareholders to pump in cash in exchange of 13.83 million shares valued at Sh20 each with minimum subscription at Sh100,000.
“This is an opportunity for all shareholders to increase their investment and maintain their existing ownership stake in the bank,” the lender said in a document.
The offer opened last Wednesday and will run for 21 days up to June 18, 2019. The offer price per share of Sh20 translates to a discount of 15 per cent compared with the Sh23.51 which the board says is the current value per share.
According to the board, Sh217 million will go into onward lending, Sh30 million for marketing and rebranding, Sh24 million for a new core banking system while Sh5 million will be used to upgrade mobile lending platform.
The lender has been in the red since 2016 and closed last year with Sh13.6 million loss, sending accumulated losses to Sh86.14 million. This put in jeopardy its goal of becoming medium-sized micro-financier by 2022 with an asset base of Sh1.2 billion.
Mazars, the independent auditors, say in the 2018 annual report that accumulated losses raise substantial doubt about the company’s ability to continue as a going concern unless directors, shareholders and related parties pump in money.
Fusion Capital owns 23.47 per cent stake followed by Morris Gitonga Njue with 6.27 per cent stake.
If shareholders do not take up the offer, the board said it may allot or otherwise dispose of those shares to such persons under terms to be decided.
The Central Bank of Kenya (CBK) 2017 inspection report ranked Key Microfinance eighth out of the 13 microfinance institutions, with a market share of 0.7 per cent and classified among the small microfinance banks.
The CBK licensed the lender in 2011 to operate as a deposit-taking micro-financier and brought Fusion Capital on board in 2014.
Only four of the 13 returned a net profit in 2017, the CBK annual report shows, painting a grim picture of the industry.