Troubled Church-owned SMEP Microfinance bank is seeking shareholder approval to sell a majority stake for Sh571.8 million to an undisclosed strategic investor as it searches for capital for turnaround efforts after a loss-making streak.
The microfinance has invited shareholders to an extraordinary general meeting (EGM) on January 23, with the owners expected to vote on the sale of a 51 per cent stake to an equity partner.
“That pursuant to section 348 of the Act and the authority conferred by resolution 3(C) above the directors be and are hereby authorised to allot the new shares and existing class A ordinary shares to the strategic investor in consideration of the sum of $4,646,905 (Sh571.8 million) to enable the strategic investor to acquire 51 per cent of the issued capital of the company,” said SMEP.
The lender says it faces capital and liquidity challenges over the last decade, making it difficult to invest in new business models to meet the changing customer preferences.
The board wants money from the strategic shareholders to help the lender increase its core capital, expand the branch network, and increase the loan book.
SMEP was founded by the National Council of Churches of Kenya (NCCK) in 1975 and received a deposit-taking microfinance licence in 2010.
The NCCK has been shedding off some shares to get to the 25 per cent threshold as required by the Central Bank of Kenya regulations.
The small lenders have struggled to post profits despite the economic recovery.
The industry has faced stiff competition from mobile lenders amid increasing uptake of financial services through mobile, a shift also pushing commercial banks to adopt digital solutions to widen their reach.