IFU has the option to convert their investment into equity within the first three years
Sidian Bank has received US$12 million capital injection from the investment fund for developing countries (IFU).
The lender has inked a deal with the fund, a Danish Development Finance Institution (DFI) that will see the bank receive the funds as part of the broader initiative to grow the bank to Tier 2 status.
The funds are expected to boost the bank’s regulatory capital ratios as it works towards achieving its strategic objective of becoming a Tier 2 bank by 2022.
The shareholders of the bank approved a rights issue of Ksh1.5 billion (US$15.1 million) and the tier 2 capital raise of Ksh1.2 billion(US$12 million), which in combination will support growth of the bank’s assets by an additional Ksh10 billion(US$100.4 million )to Ksh35 billion(US$351.4 million).
“We are pleased to report that in the recently concluded rights issue, Sidian Bank raise Ksh1.1 billion(US$11 million ) and today we are here to announce IFU’s US$12 million investment in Tier 2 capital in Sidian Bank,” the two said in a joint statement.
“The funds will be used to enable the bank further its mission to empower entrepreneurs through the strategic growth of its loan book with a key focus on the SME loan book, trade finance portfolio and mobile lending.”
As part of the agreement, IFU will have the option within the first three years, to convert their investment into equity, subject to Central Bank of Kenya (CBK)approval.
Sidian Bank chairman Dr James Mworia said:“We are very pleased with the decision by IFU to invest US$12 million in the bank. This is a major vote of confidence in Sidian Bank and its strategic initiatives by an institutional investor with significant investments in financial services companies across the globe.”
“In addition, IFU will serve on the board of the bank, and we look forward to leveraging their breadth of experience in the financial services sector. Centum Investment together with the other shareholders of Sidian Bank, continue to be committed to building a strong bank with robust governance structure that will support the drive to be the preferred bank for SMEs,” Mworia added.
The deal will see Sidian progressively relinquish a 20 per cent stake to the new investors, which is also a shareholder in the 310-megawatts Lake Turkana Wind Power firm.
IFU could become Sidian’s second-highest shareholder if it converts the entire investment into equity, coming second after Centum Investment Company which is the bank’s majority shareholder.