Ecobank gets additional Sh4b capital injection

Togo-based Ecobank Transnational Incorporated (ETI) has injected Sh4.325 billion into Ecobank Kenya, effectively doubling its lending capacity.

This comes at a time when banks have been digging into the bond market to shore up their capital base, ahead of the new prudential guidelines set out by Central Bank of Kenya. These new capital adequacy ratios take effect in January 2015. Ecobank Kenya has gradually been boosting its financial war chest, as it angles to finance mega projects and transactions including cross-border and regional trade - its niche in the local and regional banking space.

“We are delighted to receive these funds that will boost our lending capacity, aid business growth in line with our strategy and critically address the problem of high cost of funds,” said Ecobank Kenya Managing Director Ehouman Kassi.

East Africa has been attracting the attention of global and regional investors keen to tap into some of the emerging business opportunities.

 Massive investments

This follows the discovery of commercially viable oil and gas deposits in Uganda, Kenya and Tanzania, a development that will need massive investment in infrastructure for these countries to exploit the natural resources. “Kenya is one of the key markets in Africa that we will focus on as a gateway to business opportunities within the East Africa region,” said Ecobank Group Chief Executive Officer Albert Essien in a recent interview.

The new capital injection follows a commitment made in July this year by the group’s top management to strengthen the Kenya subsidiary and make it the group’s hub and springboard in Eastern Africa.

Ecobank Kenya entered the local banking space after acquiring the former East African Building Society (EABS). Although Ecobank operations in East Africa managed to reduce its operating loss marginally in 2013, strategic challenges remain according to the group’s annual report, 2013.

“To start addressing these, we have strengthened management and injected $25 million (Sh2.175 billion) of additional capital into Ecobank Kenya. The group intends to further capitalise the Kenyan business in 2014 so it can act as a strong hub for our operations in Africa,” said Ecobank Group CEO Albert Essien in July this year. “This region has 10 of the fastest growing economies today, with most countries doing more than five per cent growth plus in gross domestic product,” said Essien.