Kenya: Jamii Bora plans another cash call in September

From The Star

NEW local bank Jamii Bora is eyeing another rights issue in September to raise Sh500 million and increase its capital base to Sh1.3 billion to fund the bank’s expansion and growth plans. Jamii Bora bank CEO Sam Kimani announced plans to open a new branch each month this year to meet its target of 12 branches for 2012, as it seeks to grow its network in the market. “We have enough capital to grow which is slightly over Sh800 million and by end year we shall be compliant at Sh1 billion mark,” said Kimani yesterday during the opening of the bank’s second outlet in Eastleigh area.

Jamii Bora is looking to spend about Sh100 million this year to fund the branch expansion project and recruitment of staff. The bank which started operations under the current management after a merger with City Finance Bank and Jamii Bora Microfinance. It has an estimated 300,000 customers most of whom were previously members of the micro finance institution.

The bank which is still in the set up stage said it will also start offering its customers ATM services through the Kenswitch shared network from next week. Late last year, shareholders of the bank approved a sale of 925,000 ordinary shares and 1,350,000 Class A shares to Asterisk Holdings Ltd where the firm invested Sh320 million in the bank. Jamii Bora Bank also raised an additional Sh270 million through a rights issue last September.

In its four year growth plan, the bank is planning to open a branch in each of the country’s 47 counties. On agency banking, Kimani said the bank will start preparations for its roll out in the second half of 2012, after putting in place a core banking system that agents would also need to conduct banking services. The new Eastleigh branch is located close to the Mathare junction where many Jamii Bora members reside.

Kenya: Jamii Bora Bank gets Sh200m loan from women’s fund

By Moses Michira, Business Daily Africa

Jamii Bora Bank has obtained a Sh200 million loan from the Women Enterprise Fund (WEF) for onward lending to women-owned businesses. The move is set to intensify competition for customers in the microfinance segment.

Along with the credit facility, the bank ranked as the smallest in the country by asset base, has announced plans to raise Sh200 million through a rights issue by September whose proceeds will help shore up its capital base.

The microfinance institution has lately stepped up expansion plans and is in the process of converting 12 of its outlets into fully-fledged bank branches within the year in a scramble for the bottom end of the market. Chief executive Samuel Kimani said Thursday that the credit line from WEF will boost Jamii Bora’s lending kitty, as it seeks to position itself as the micro-lender at the grassroots level. “The bank is seeking to grow its presence at the bottom end of the market by offering products for the low-income group that other players have not developed,” Mr Kimani said, adding that loans will be secured.

Default

Jamii Bora, which was until two years ago operating as a microfinance institution, has only one branch but is relying on its over 40 outlets to reach customers, mostly individuals working in the informal sector and small business owners.

The WEF loan will attract a one per cent interest while the eventual borrowers will pay eight per cent interest, where the difference will cover for the bank’s margins and operational expenses. Mr Wainaina wa Njeri, the chief executive at WEF, said that the agency was acting as a wholesale lender — a model that cushions it against default risk which currently stands at 24 per cent. “The average countrywide repayment rate is at 76 per cent, but we are certain that all monies lent through the intermediaries will be fully recovered,” said Mr wa Njeri. WEF was established in the run-up to the 2007 General Election to promote enterprise among women.

Capital

Mr wa Njeri said WEF was seeking to become self-sustaining by eliminating bad debts in what would eventually eliminate State funding.

Jamii Bora is one of the 105 intermediaries whose network the fund will depend on to reach the target market with loans ranging from Sh500 to Sh500,000.

In the planned rights issue the bank, which was formed after the merger of Jamii Bora Microfinance and Citi Finance Bank in 2010, will seek to increase core capital to Sh1 billion as required by the industry regulator by December 31, from the current Sh800 million. Mr Kimani said that major shareholders have committed to take part in the rights issue, which is the second in as many years.

The initial cash call concluded in September last year raised Sh270 million. The bank also attracted new investors, Messrs Asterisk Holdings, a consortium of local investors who include the chief executive and Timothy Kabiru, its chief operations officer.

The pair, formerly executives at KCB, is leading the transformation of the lender as it seeks to shed its loss-making tag.

Some of the major shareholders of the bank include Jamii Bora Scandinavian Group, which has a 25 per cent stake, Messrs Asterisk with 25 per cent, Jamii Bora Africa Group 12 per cent, and Nodic Micro with five per cent.

Kenya: Jamii Bora Bank targets mid-tier status in upgrade

By George Ngigi, Business Daily Africa

Jamii Bora Bank will upgrade 11 of its outlets to Central Bank’s specifications for full branches next year in a bid to achieve mid-tier lender status.

The bank-—which converted from a microfinance institution last year—will be making a Sh200 million cash call on its shareholders to finance the upgrade and also meet Central Bank of Kenya (CBK’s) minimum capital requirement of Sh1 billion.
Chief executive Samuel Kimani said in an interview yesterday the upgrade of 11 out of its 45 outlets will cost Sh55 million.

The outlets were part of the infrastructure used by Jamii Bora Microfinance before it was bought out by Citi Finance Bank.
“It will help us to scale up quickly to a middle-tier bank serving the lower-end market,” said Mr Kimani.

CBK classifies Kenyan banks according to small, mid-tier and large based on their assets, deposits, capital size, number of deposit and loan accounts.

Jamii Bora bank has over 300,000 customers but has only one deposit taking branch—while the others are sales outlets from which customers open accounts and fill in loan application forms.

Deposits mobilised from the clients, who operate in groups, are held in an account with other commercial banks, an arrangement that denies Jamii Bora transaction commissions.

In the nine months to September the bank reported Sh2 million earnings from fees and commissions.

It plans to have converted the branches by end of July next year. Construction of branches is an expensive venture necessitating the Central Bank to introduce the agency model to eliminate costs.

Latest capital injection by the new investors– Messrs Asterisk Holdings— combined with a rights issue of Sh270 million concluded at the end of September has given the bank the impetus to expand. If approved in an Extra ordinary general meeting scheduled for December 15, the capital by Messrs Asterisk will see the bank’s core capital rise to Sh800 million, surpassing the statutory requirement of Sh700 million set by the Central Bank of Kenya for end of year 2011.
This will still be lower than the Sh1 billion required by the industry regulator by end of 2012.

“We have strong shareholders and so raising Sh200 million should not be a difficult task. We were at Sh230 million at the close of last year,” said Mr Kimani.

Some of the major shareholders of the bank include Jamii Bora Scandinavian group which has a 25 per cent stake, Messrs Asterisk with 25 per cent, Jamii Bora Africa Group, 12 per cent and Nodic Micro with five per cent.

Some of the outlets which will be converted to full-fledged branches are Kikuyu, Mwingi, Huruma and Eastleigh. Jamii Bora is also seeking to be included in the Kenswitch network allowing access of ATM services to its account holders.Mr Kimani points out that the bank intends to maintain a lean structure to control staff costs.

“In this period of turn-around and growth we have to ensure there is no duplication of tasks-and this is a small bank,” said Mr Kimani.