KCB has obtained a loan of $150 million (Sh18 billion) from the International Finance Corporation (IFC) to support its lending to eco-friendly ventures.
IFC disclosures on the new credit line say the new facility will have a maturity of seven years, with a grace period of two years, and will also include the institution providing back office support to KCB on green finance strategy.
The new loan will take KCB Group’s total borrowings from IFC to Sh45 billion, with the lender having already held two other loans worth a combined Sh27 billion ($225 million) taken up in 2018 and 2020.
This makes KCB the biggest borrower from IFC among local tier one lenders, ahead of Equity Group’s Sh38.9 billion loans. IFC, however, also holds a 6.7 per cent stake in Equity that it acquired from Britam for Sh13.9 billion in April this year.
“The proposed project consists of a $150 million senior unsecured loan to KCB Bank Kenya Limited. The proceeds will support the growth of the bank’s climate finance portfolio…the project builds on prior and new Climate Advisory Services (AS) engagements, which serve as an anchor for the bank’s strategic commitment to deepen its participation in this under-served segment,” said the IFC.
“The scope of IFC’s Climate AS will include input to KCB’s climate finance strategy, knowledge, and capacity building, and climate risk assessment and reporting.”
The global financier, however, did not provide details on the interest rate to be charged on the new facility.
Existing KCB Kenya loans with the IFC comprise a 10-year, $150 million loan issued in 2020 at Libor plus 5.15 per cent per annum, and a seven-year, $75 million (Sh9 billion) loan issued in 2018 at Libor plus 5.3 per cent.
These older loans will, however, need to be repriced now that the Libor benchmark has been phased out.
The IFC has opted to adopt the Secured Overnight Financing Rate (SOFR) that has been developed by the Federal Reserve Bank of New York, and which has been chosen as the new benchmark for dollar-denominated contracts.
Before the latest KCB exposure, the IFC was already among the top international providers of capital to tier one banks in Kenya, with an outlay totaling Sh105.8 billion at the end of 2021 through debt and equity.
The large lenders, due to their wide reach both locally and in the region, have proved key to the IFC in its effort to disburse its recently committed $2 billion MSMEs financing programme in Africa.
In Kenya, the big players also offer a strong credit delivery and monitoring system that is not available to smaller lenders or international financiers.
The foreign currency loans also help banks by building up their forex positions — just like the government’s external borrowing bulks up official forex reserves — which allows them to support businesses that import products or raw materials.
The longer tenor of these loans is also an important factor for banks allowing them to offer smaller businesses longer credit terms.