The Investment Fund for Developing Countries (IFU), a Danish Development Finance Institution (DFI), has invested $12m in Sidian Bank as part of the broader initiative to grow the bank to Tier 2 status.

Sidian Bank is a full-service commercial bank providing an array of financial services to individuals and enterprises and has been a leading player in Kenya’s enterprise banking sector.

Morten Elkjaer, IFU Vice President, said: “We are very pleased to engage with Sidian Bank and its shareholders. We believe this will help increase access to finance that can spur growth of SMEs and contribute to sustainable development and jobs in Kenya by providing effective and timely financial services. Our investment in Sidian Bank is the first investment to unfold our new strategy to support more financial institutions with an SME focus.”

The funds are expected to boost the bank’s regulatory capital ratios as it works towards achieving its strategic objective of becoming a Tier 2 bank by 2022. 

The shareholders of the bank approved a rights issue of KES.1.5bn and a tier 2 capital raise of KES.1.2bn, which in combination will support growth of the bank’s assets by an additional KES.10bn to KES. 35bn.

In the recently concluded rights issue, Sidian Bank raised KES. 1.1bn.

The funds will be used to enable the bank further its mission to empower entrepreneurs through the strategic growth of its loan book with a key focus on the SME loan book, trade finance portfolio and mobile lending.

As part of the agreement, IFU will have the option within the first three years, to convert their investment into equity, subject to Central Bank of Kenya (CBK) approval.

James Mworia, Chairman of the Board of Sidian Bank, said: “We are very pleased with the decision by IFU to invest $12m in the bank. This is a major vote of confidence in Sidian Bank and its strategic initiatives by an institutional investor with significant investments in financial services companies across the globe.” 

“In addition, IFU will serve on the board of the bank, and we look forward to leveraging their breadth of experience in the financial services sector. Centum Investment together with the other shareholders of Sidian Bank, continue to be committed to building a strong bank with robust governance structures that will support the drive to be the preferred bank for SMEs.”

Chege Thumbi, CEO at Sidian Bank, added: “The funding comes at a time when the bank has intensified accelerated growth with an aim of achieving its 5-year strategic goals. With this investment, the bank will be well capitalized with high liquidity, offering ease of access to funding, financial backing and fast turn-around times for our SME customers and by extension position us as the bank of choice for SMEs and entrepreneurs. We anticipate that the investment by IFU will therefore drive improved performance of the bank profitably.”

IFU is a self-governing state fund with the purpose of promoting economic and social development in developing countries through provision of advisory services and risk capital to companies in developing countries and emerging markets.

Investments are made on commercial terms in the form of share capital and loans to project companies. 

Advice is provided from IFU’s head office in Copenhagen and on location through regional offices in Asia, Africa, including Nairobi, Latin America and Central and Eastern Europe.