- SMEP has faced capital and liquidity challenges for over a decade, making it difficult to invest in new business models.
- The acquisition therefore, is expected to strengthen the firm through injection of additional capital to fund business expansion.
The Central Bank of Kenya has approved the acquisition of 51 per cent shares in SMEP Microfinance Bank by the US faith-based organisation Hope Advancement Inc.
CBK in a statement says this is after approval on July 27, this year under Section 19 (4) of the Microfinance Act, and a further approval by the the National Treasury CS on August 4, pursuant to Section 19(3)(b) of the Microfinance Act.
The US based christian organisation was set to acquire the stake in SMEP Microfinance Bank by $4.65 million (Sh702.6 million), approved by the Competition Authority of Kenya (CAK), deepening acquisitions in the Microfinance sector.
Prior to the acquisition, the National Council of Churches of Kenya (NCCK) held 71 per cent of SMEP’s shares.
The acquisition will see NCCK’s majority stake diluted from 71 per cent to 34.8 per cent, while the minority shareholder’s stake will drop to 14.2 per cent from 28.9 per cent.
The institution controls a market share of 5.09 per cent of the microfinance banking sector in the country, and is considered a large tier microfinance bank.
SMEP has faced capital and liquidity challenges for over a decade, making it difficult to invest in new business models to meet the changing customer preferences.
The acquisition therefore, is expected to strengthen the firm through injection of additional capital to fund business expansion, upgrade of information technology infrastructure, as well as reconstitution of the board to bolster governance, CBK says in part.
The acquiring firm Hope Advancement Inc, was incorporated on November 1, 2011, in the State of Delaware, USA, and is a wholly owned subsidiary of Hope International Inc.
It acts as the holding company for investments and microfinance activities of the group.
On the other hand, SMEP Microfinance was founded by NCCK in 1975, and received a deposit taking microfinance licence from CBK in 2010.
The acquisition comes at a time Microfinance banks (MFBs) in the country are banking on the sale of controlling stakes to foreign firms to end a run of over six years in losses and shore up their businesses.
They have been grappling with a streak of financial losses, eroded capital and shrinking market share which have given large banks and digital lenders an easier task to beat them at the game.