The East Africa Community registered six private equity deals in March, signalling a rising popularity with investors.
The confederation said the private equity deals were mainly in infrastructure, manufacturing and real estate.
Investors and multinational executives attending this year’s East Africa Trade and Commodity Finance Conference convened by the Global Trade Review in Nairobi said banks should rethink their traditional loan offerings to remain relevant.
Witnessed, was a diminishing interest in banks as sources of credit, as the rates charged had turned out to be expensive at above 18 per cent, compared with private equity deals which usually attract seven to eight per cent interest rate per year.
Another strong point is the repayment period, which can be negotiated in case of a slowdown in business.
The forum heard that the current lending practices do not support growth but hinders uptake, forcing many businesses to rely on cheap funds from pension schemes, private equity and foreign investors.
The panellists included Nakumatt Holdings financial controller Vijay Kumar, R.H Devani’s business development general manager Geoffrey Okora and UK Association of Corporate Treasurers development director James Lockyer.
They warned that while traders continued to patronise local banks, the future portends a change of offering where banks have to come up with products that address direct business challenges or risk losing their core segment to incoming venture capitalists and private equity firms.
Mr Okora said the prohibitive interest rates charged by local banks were fuelled by increased government borrowing which saw many banks buy corporate bonds expecting handsome returns.
Among the most innovative products introduced recently is a facility being enjoyed by fresh produce suppliers contracted by local retail chains where they are paid promptly for their supplies by local banks in a supplier-retailer purchase deal.
This has led to prompt and ready supplies, boosting fresh produce sales.
The suppliers’ key role is to source fresh produce as they enjoy a guarantee that payments will be made upon delivery.
Banks then give retailers time to recoup their sales and pay back the loaned amount at a fee, enabling suppliers to enjoy cheap loans on account of the established brands like Tuskys and Nakumatt stores