I&M Bank Kenya will receive a $50 million (Sh5.4 billion) long-term loan from the International Finance Corporation to boost its capital and expand its lending to small and medium-sized businesses.
The subsidiary of Nairobi Securities Exchange-listed I&M Holdings is the latest among local banks to raise billions of shillings from international financiers to fund their expansion and ride out the increased economic risks brought by the Covid-19 pandemic.
“The project consists of a Tier 2-qualifying subordinated loan of $50 million (Sh5.4 billion) to I&M Bank Limited, the largest subsidiary of I&M Holdings Plc,” IFC says in its investment disclosures.
“The proposed investment will provide I&M with a subordinated loan which will qualify as tier 2 capital under the laws and regulations of Kenya, enhancing the bank’s capitalisation and to be used for financing its lending operations in respect of small and medium enterprises.”
IFC said the loan will have a maturity of up to seven years, with a five-year grace period to conform to the Central Bank of Kenya’s Tier 2 capital requirements.
I&M is expected to lend to customer groups that fit the definitions set out by the international financier.
IFC defines SMEs using various measures including firms having between 10 and 300 employees or annual sales of Sh10 million to Sh1.5 billion. The loan size per borrower usually ranges from Sh1 million to Sh200 million.
The loan comes at a time when I&M’s parent company has stepped up its investments in the regional market.
I&M Holdings recently completed the acquisition of a 90 percent stake in Uganda’s Orient Bank Limited in a deal in which it spent Sh3.6 billion.
It also invested an additional Sh396.7 million in its Mauritian subsidiary Bank One in the year ended December to boost its capital position.
The Kenyan banking multinational reported a net loss of Sh687 million from its ownership in Bank One in the review period, reversing a net profit of Sh898.9 million recorded in the prior year.
This contributed to its consolidated net profit dropping to Sh8.4 billion from Sh10.7 billion.
I&M subsequently cut its proposed dividend to Sh2.25 per share from the previous year’s payout of Sh2.55 per share. The lender also proposed a bonus issue of one share for every one held, a move that will double the volume of its outstanding stock to 1.6 billion units.