32805 - Kenya Commercial Bank III

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Summary of Investment Information

Project Number

32805

Company Name

KCB GROUP PLC

Date SPI Disclosed

Feb 26, 2013

Country

Kenya

Region

Africa

Projected Board Date

Apr 9, 2013

Environmental Category

FI-2 - Limited

Status

Completed

Last Updated Date

Jun 12, 2021

Department

Global Industry, Financial Markets

Industry

Financial Markets

Previous Events

Approved : May 16, 2013
Signed : May 31, 2013
Invested : Apr 2, 2014

Sector

Commercial Banking - General

Project Description

The proposed engagement with Kenya Commercial Bank Limited (“KCB” or “the Group”) is aligned to IFC’s strategy for the East African financial sector. The Project is comprised of a $150 million senior loan facility to KCB, one of largest and systemically important banks in Kenya and the East Africa region. The Project is expected to provide the Bank with significant long-term financing to support its strategic objectives.

The funding will be used to support the Group’s regional expansion, increase access to finance for crucial sectors of the economy such as SME’s, agribusiness, microfinance and facilitate increased mortgage lending especially for affordable housing. The use of proceeds will also reach the Bank’s subsidiaries in the East Africa region and hence increase IFC reach in IDA countries.

In addition, the project will increase access to finance in Kenya with an emphasis on expanding opportunities for the bottom of the pyramid (“BOP”) by leveraging KCB’s strong brand positioning and distribution capacity.

Sponsor / Cost / Location

Product Line	IFC Investment (million USD)
Risk Management
Guarantee
Loan	95.0
Equity

Development Impact

The Project is expected to have a high development impact in the following areas:

(i) Increasing access to finance and extending tenors of credit facilities to a number of key sectors for the economy namely, SMEs, agribusiness and housing. As these sectors grow, their need for longer term funding for capital investment has increased over time.

(ii) Enhancing competition in the banking sector in Kenya, by supporting a systemic local bank that serves crucial yet largely underserved sectors in the economy; and

(iii) Supporting the development of a robust regional banking platform which is essential for the successful economic integration of the newly created East African economic community.

(i) Longer Tenors: Long term funding especially in US$ is not readily available in the Kenyan market nor in the Eastern Africa Region. IFC''s seven year loan would allow the Bank and its subsidiaries to extend the tenor of its facilities, targeted at a number of priority sectors, without introducing unsustainable maturity mismatches into the balance sheet. This will also encourage the use of long term funding for prudent balance sheet risk management across the banking sector in Kenya and the East Africa Region.

(ii) Resource mobilization: It is anticipated that part of the facility will be sourced from IFC''s DFI partners under the Global SME Facility. This will allow KCB to develop relationships with other international lenders thereby broadening it potential funding sources and ultimately building the Bank''s profile in the global financial markets.

(iii) Long-term partnerships: This transaction is in line with IFC''s strategy to establish long-term partnerships with emerging players in developing countries. IFC''s partnership with KCB will support its regional expansion plans and will give the Bank a comparative advantage over other regional players. In addition, as the partnership strengthens and KCB becomes increasingly more sophisticated, the Bank will be able to draw on IFC''s global expertise for product innovation and banking best practices and serve as a example to other Bank''s in the region.

(iv) Stamp of Approval: IFC''s partnership with KCB will positively influence the perception of the market and the public, and could allow the Bank to attract additional long term funds both locally and from the international market

E&S Category Rationale / Risks and Mitigation

This transaction involves a straight unsecured senior loan to KCB. The funding will be used to support KCB’s regional expansion in addition to increasing the level of long term funding available to the Bank which would improve access to finance for crucial sectors of the economy such namely SME’s, the agribusiness sector and mortgage finance especially for affordable housing. The overall portfolio risk is considered to be medium. The project has therefore been categorized as FI-2 in accordance with IFC’s Environmental and Social Review Procedure. The Bank’s corporate lending accounts for approximately 50% of the total portfolio, but the key sectors of lending mainly entail limited adverse E&S risk and impacts that are few in number, generally site-specific, largely reversible and readily addressed though mitigation measures. For this project the client will be required to continue to screen loans against the IFC Exclusion List, the Kenyan E&S laws and regulations and the IFC Performance Standards.

The key risk is the ability of KCB to continue to fully implement its SEMS to identify and manage the environmental and social risks associated with its lending activities - particularly its capacity to roll out and implement the SEMS in its regional subsidiaries. The applicable requirements are the IFC Exclusion List, applicable National Laws in Kenya and the IFC’s Performance Standards. The bank has already met IFC’s requirements of: (i) appointing an E&S Officer (ii) developing a suitable ESMS to ensure that its lending activities are in compliance with the Exclusion List, the applicable National Laws in Kenya and the Performance Standards, and ensuring that all members of staff responsible for implementation are trained; (iii) complying with the PS2 on Labour and Working Conditions; and (iv) providing an annual report on its environmental and social performance in the format provided by IFC.

Task Description	Anticipated Completion Date
Supply final copy of Sustainability Policy and ESMS signed off by Board to IFC	On or prior to Commitment
Confirm that policy harmonization and incorporation of S&E conditions into lending agreements has been completed	On or prior to Commitment
Supply 5 examples of completed E&S due diligence forms	On or prior to Commitment
Set up suitable organizational structure to implement SEMS in subsidiaries	On or prior to Commitment
Provide IFC with training progress report highlighting training completed and roll out to subsidiaries.	On or prior to Commitment

Contacts

For Inquiries About the Project, Contact

KCB Corporate Affairs
Kenya Commercial Bank Limited
Head Office, Kencom House – 8th Floor
Moi Avenue
Nairobi, Kenya.
(254) 20 3270000
(254 20 3270156

mailto:kbosire@kcb.co.ke

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