With the Bank of Africa (BOA) looking to expand its lending services to small and medium-sized firms by up to $10 million, the Kenyan branch is set to receive $5 million from the International Finance Corporation as insurance against loan defaults. As such, BOA will get guarantees on half the amount from the international financier.
This comes at a time during which the bank has registered losses that have forced it to reduce lending despite breaching critical capital buffers.
According to the IFC, they offer risk-sharing facilities to help lenders expand into areas of high uncertainty or to access new customers.
In addition to underwriting a bit of the bank’s loan portfolio, IFC also supplies technical advisory services that help in the identification of borrowers and credit disbursement.
Companies that can benefit from BOA’s new loans are those that fit the criteria set by IFC. This includes having annual sales of Sh10 million to Sh1.5 billion in annual sales.
The loan size will range from Sh1 million to Sh200 million per borrower.
This risk-sharing facility has come at a period during which BOA’s breach of capital ratios has gotten worse. This has seen the lender turn to its parent company, Mali-based BOA Group SA, to raise an additional $15 million (Sh1.6 billion) in capital.
For instance, in the quarter ended March, it's core capital to deposit ratio has dropped to 5.6 percent missing the minimum level by 2.4 points.
In the review period, the bank reported Sh289.9 in net losses with its loan book shrinking to Sh15.5 billion from Sh21
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