Branch App/ branch.co
NAIROBI, Kenya Feb 8- Branch International can now move forward with its plans to acquire Century Microfinance Bank after receiving the greenlight from National Treasury.
This after the National Treasury exempted the digital lender from a law limiting individual shareholding in microfinance to 25 percent.
In a gazette notice signed by the Cabinet Secretary National Treasury, Ukur Yatani, the San-Franscisco based fintech has been exempted from Section 19 of the Microfinance Act (for 4 years through 2025).
Currently, individuals or single entities are barred from holding more than a 25 percent stake in a microfinance institution.
This paves way for the acquisition of an 85 percent stake in Century Microfinance Bank by the American based fintech firm.
If successful, the transaction will represent the first buy-out of a mainstream lender by a digital lender in the country as the new digital lending law kicks in.
Last May, Branch received approval from the Competition Authority of Kenya (CAK) to acquire 84.9 percent stake in the bank which is classified as one of the country’s smallest micro-lenders.
CAK directed the two financial institutions to maintain the terms agreed with borrowers in respect to existing loans prior to the acquisition.
They were also asked to retain their existing performing and non-performing loans (NPLs) in accordance with their terms until their expiry.
The transaction however remains subject to further regulatory approvals by the Capital Markets Authority (CMA) and the Central Bank of Kenya (CBK).
In December, President Uhuru Kenyatta signed into law the Central Bank Amendment Bill 2021 which brought digital lenders under CBK’s control.
Non-deposit-taking credit-only providers have remained largely unregulated for a long time, with several abusing the freedom to charge high interests and debt shame their customers.
The new law gives CBK powers to revoke the permits of digital lenders who breach the confidentiality of personal information to pursue defaulting borrowers.
Branch International is backed by the World Bank financing arm- the International Finance Corporation (IFC) and Andreesen Horowitz, an investor in social media giant Facebook.
The digital lender is among pioneer digital lenders in Kenya and describes itself as a machine-learning provider of mobile financial services to emerging markets.
The firm was founded in 2015 and operates in other markets including Nigeria, India and Mexico.
Century Microfinance Bank on other hand specializes in providing financial services to micro, small and medium businesses and has an excess of 26,000 clients.
As at Decmber 2019, Century MFB was ranked as the third smallest MFB with market size of 0.4 per cent and an asset base of Sh336 million.