GT Bank Kenya is seeking Sh3.2 billion credit facility from IFC for onward lending to small and medium-sized firms. FILE PHOTO | NATION MEDIA GROUP
What you need to know:
GT Bank will focus its lending on SMEs and larger companies that are in productive sectors of the economy, which is a key lending criteria for the IFC.
The five-year tenor will also enable GT Bank to lend long-term which is a challenge for the banking industry since deposits, needed to originate loans, are normally short-term.
Analysts say that the choice to focus on SME lending is due to expected pick-up in loan uptake by these businesses as the general economy improves.
Guaranty Trust Bank Kenya (GT Bank) is looking to borrow Sh3.2 billion from the International Finance Corporation (IFC), the World Bank Group’s private lending arm, for onward loans to its small and large corporate customers.
Disclosure documents released by the IFC show that GT Bank Kenya, a medium-sized lender, will get the funding through a $35 million (Sh3.2 billion) five-year loan that will have a two-year grace period.
GT Bank will focus its lending on SMEs and larger companies that are in productive sectors of the economy, which is a key lending criteria for the IFC.
“The project will allow the bank to support agribusiness, manufacturing and information, communication and technology sectors, all critical in job creation and economic development,” noted the disclosure documents.
The IFC did not indicate the interest rate on the loan, but facilities from such lenders are usually advanced at single digit rates which makes them more favourable than locally sourced debt, which tends to be more expensive.
The five-year tenor will also enable GT Bank to lend long-term which is a challenge for the banking industry since deposits, needed to originate loans, are normally short-term.
The proposed loan will be the second capital injection in the firm in less than two years after GT Bank Plc, the Nigerian parent company, pumped Sh2.8 billion ($30 million) in February last year after completing a buyout of majority stake in the local lender which was then known as Fina Bank.
GT Bank Plc bought a 70 per cent stake in Fina Bank for Sh9.2 billion ($100 million) in a deal that resulted in a change of board composition and top management.
The IFC disclosure documents show that Dhanu Hansraj Chandaria and Rameshkumar M. Patel are the other major shareholders in GT Bank Kenya.
GT Bank Plc said that its investment in the Kenyan-based bank is meant to give it access to the region’s fast growing banking industry.
“This acquisition would help in further diversifying the group’s revenue stream by leveraging on the growth potential of the East African banking industry fuelled by rapid GDP expansion,” says GT Bank Plc 2014 annual report.
The bank has subsidiaries in Uganda and Rwanda, two countries whose economies the International Monetary Fund projects will grow by 6.3 per cent and 6.7 per cent respectively in 2015.
Analysts say that the choice to focus on SME lending is due to expected pick-up in loan uptake by these businesses as the general economy improves.
“Because it is one of the fastest growing sectors in the economy,” Agnes Achieng’, a research analyst at Sterling Capital, said about the focus on the SMEs.
In the last few months, the IFC has given loans to DTB, Chase Bank and the NIC which, similar to GTB Kenya, have strong lending policy to the SME sector.
In September last year, the IFC proposed that it would lend DTB Sh1.77 billion while Sh2.22 billion would go to Chase Bank.
In addition to lending to SME sectors, the loans would also help the two banks strengthen their capital bases as per requirements set by the Central Bank of Kenya (CBK), the industry regulator.
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