The Bank is the largest universal banking group in Kenya, with a well-established domestic retail and corporate banking franchise. Outside Kenya, the Bank has banking subsidiaries in Tanzania, Uganda, South Sudan and Rwanda. The Bank’s shares are cross listed on the Kenya, Uganda, Tanzania and Rwanda Stock Exchanges and are widely held by Kenyan and other international investors, with the Government of Kenya being the single largest investor having a 17.75% interest.

The proposed investment will be in the form of senior loans of up to $105 million for IFC’s own account.

100.0 million (USD)

Product Line	IFC Investment (million USD)
Risk Management
Guarantee
Loan	100.0
Equity

* These investment figures are indicative

KCB is headquartered in Nairobi, Kenya with a 168 nation-wide branch network in Kenya and 50 branches in international subsidiaries in other East African countries. KCBR is based in Kigali and has 9 branches across the country.

i) Support Lending and Growth in the East African Market: The East African banking sector was affected by the global financial crisis, which led to a slowdown in the economy and reduced lending by the banking sector. Now that the situation has stabilized, KCB is well positioned to increase lending in the local market, which is important for investment and economic recovery in the region. The Project will, therefore, support the resumption of lending by KCB ultimately supporting renewed economic activity. (ii) Increased Access to Finance for SMEs: SME's are a key growth sector for KCB. IFC will assist with SME development beyond financing to include advisory services for key aspects of its SME operations. The expected improvement in access to finance for SMEs will help to generate employment at the grass roots level and further facilitate regional trade which is expected to grow rapidly following the economic integration of the East African Community. (iii) The investment in KCB Rwanda will have high development impact. On an institutional level, access to longer term local currency financing will help KCBR manage its liquidity more effectively by limiting foreign currency risk. On a sector level, the introduction of longer term financing in the market will afford more options to SME's and individual borrowers by providing longer term financing for mortgages and other new products. In addition, the proposed technical assistance program will build the Bank's capacity in mortgage origination and monitoring in line with global best practice. (iv) Support regional Expansion and integration IFC's engagement with KCB and the support for its regional expansion strategy will encourage other banks to follow suit, which improves the level of competition and service in the regional banking sector. This with strengthen the regional economy and contribute to the success of the newly created economic community.

(i) Providing long-term financing to assist a systemic and well managed banking group to achieve its growth objectives within the constraints of the global financial crisis, while concurrently improving the banks' reach to underserved market segments such as small and medium enterprises ("SMEs") and affordable housing. (ii) IFC's investment in KCBR will play a significant role is supporting the Bank's expansion by enabling longer term financing to support portfolio growth, and fund longer tenor products such as mortgages. Specifically, IFC's additionality to the Project is delivered in the form of the ability to provide local currency financing through IFCs unique swap arrangement with the NBR, as well as the technical assistance in the form of the mortgage toolkit.

This project has been classified as a Category FI project according to IFC’s Environmental and Social Review Procedure. During appraisal, IFC analyzed the FI portfolio for types of transactions, size, tenor and industry sectors and analyzed the potential Social and Environmental risks associated with it. KCB provides retail (personal, micro and SME), corporate and mortgage lending, across a variety of industry sectors. Based on the review IFC determined as the Applicable Performance Requirements the IFC Exclusion List, the applicable national social and environmental laws and regulations and the IFC Performance Standards. IFC also assessed KCB’s S&E risk management practices and capacity, and appraised the Bank’s labor standards. KCB has a Sustainability Policy, but has not yet developed procedures and internal capacity to undertake S&E due diligence. The Bank’s labor and working conditions were found to be in compliance with the requirements of Performance Standard 2. Based on the Applicable Performance Requirements and FI SEMS and capacity review KCB, including its subsidiaries, will be required to (i) Identify responsible, qualified persons to manage and implement the SEMS prior to commitment, (ii) Develop an Social & Environmental Management System (SEMS), prior to disbursement to the satisfaction of IFC, (iii) develop a SEMS roll-out and training plan to ensure effective implementation of the SEMS, (iv) Commit to implement the SEMS, to ensure that its activities are in compliance with the Applicable Performance Requirements, and (v) Submit a periodic report to IFC as per a format to be provided by IFC.