- The law bars any individual from holding more than a 25 per cent stake in a microfinance institution.
- Century is ranked as the third smallest MFB with market size of 0.4 per cent
Image: FILE
The National Treasury has exempted digital lender Branch International from a law limiting individual shareholding in microfinance to 25 per cent.
This now paves way for the acquisition of an 85 per cent stake in Century Microfinance Bank by the American based fintech firm.
If successful, the transaction will represent the first buy-out of a mainstream lender by a digital lender in the country as the new digital lending law kicks in.
In a gazette notice signed by the Cabinet Secretary National Treasury, Ukur Yatani, the fintech has been exempted from Section 19 of the Microfinance Act (for 4 years through 2025).
It bars any individual from holding more than a 25 per cent stake in a microfinance institution.
In May last year, Branch International received approval from the Competition Authority of Kenya (CAK) to acquire 84.9 per cent stake in the bank currently classified as the smallest of micro-lenders in the country.
The competition watchdog directed the two financial institutions to maintain the terms agreed with borrowers in respect to existing loans prior to the acquisition.
They were also asked to retain their existing performing and non-performing loans (NPLs) in accordance with their terms until their expiry.
The transactions nevertheless remain the subject of further regulatory approvals including the Capital Markets Authority (CMA) and the Central Bank of Kenya (CBK).
In December, President Uhuru Kenyatta signed into law the Central Bank Amendment Bill 2021 which brought digital lenders under CBK’s control.
Non-deposit-taking credit-only providers have remained largely unregulated for a long time, with several abusing the freedom to charge high interests and debt shame their customers.
The new law gives CBK powers to revoke the permits of digital lenders who breach the confidentiality of personal information to pursue defaulting borrowers.
Branch International is among pioneer digital lenders in Kenya and describes itself as a machine-learning provider of mobile financial services to emerging markets.
The firm, which was founded in 2015 and operates in Kenya, Nigeria, India and Mexico is headquartered in San Fransisco California.
The digital lender is backed by the World Bank financing arm- the International Finance Corporation (IFC) and Andreesen Horowitz, an investor in social media giant Facebook.
Century Microfinance Bank on other hand specializes in providing financial services to micro, small and medium businesses and has in excess of 26,000 clients.
As of the end of 2019, Century MFB was ranked as the third smallest MFB with market size of 0.4 per cent and an asset base of Sh336 million.