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IFC to invest $5 million in Gulf African Bank.

The proposed investment consists of a $5 million equity investment in Gulf African Bank (GAB), one of only two fully fledged Islamic banks in Kenya.

The equity investment by the International Finance Corporation (IFC) will enhance GAB's capital strength and provide additional capacity for growth as the bank expands its SME and corporate lending business, according to a statement posted on the IFC's website. In addition to the equity investment, a further $3 million trade line will be made available by IFC to the bank under IFC's Global Trade Finance Program (GTFP). The project provides an opportunity for IFC to partner with a pioneer financial institution that has embarked on developing a sustainable Islamic banking market in Kenya with medium term plans to expand within East Africa.

GAB was established in September 2007 and commenced operations in December 2007. The bank offers a wide range of Shari'ah-compliant banking products and services and over the last five years has made considerable progress in raising awareness on Islamic banking in Kenya. By supporting the expansion of GAB, IFC will seek to achieve strong development impact as demonstrated by:

i) increased access to finance for retail, SME and corporate customers; ii) increased targeting of women entrepreneurs to grow the Bank's portfolio of loans to women run/owned businesses; and iii) affordable trade finance products for SMEs.

Through this project, IFC will lend credibility to a nascent Islamic banking market segment in Kenya, enhance competition within the banking sector and promote overall market development. In addition, IFC is well placed to work closely with GAB and other players in this emerging segment to engage with the regulators within the region to facilitate faster growth in Islamic banking within the region. Other key areas where IFC will add value to the bank through this investment include:

i) improved corporate governance through the recruitment of an IFC nominated independent director to GAB's board as well as championing for an increase in the number of independent directors on the board; ii) through IFC's AMSME and GTFP programs, IFC is well placed to significantly enhance the bank's capacity in SME banking and trade finance and position it to expand its product offering and increase revenues; and iii) capacity building in the Bank's social and environmental risk management capabilities and bring this closer to international best practice levels;

The project has been classified as a Category FI project according to IFC's Environmental and Social Review Procedure. The bank's portfolio is considered medium risk; most of the loans are to SME clients in low to medium risk sectors which have potential limited adverse environmental or social risks or impacts that are largely reversible, and readily addressed through mitigation measures. The Applicable Performance Requirements for the project are the Exclusion List, the applicable National Laws in Kenya and the Performance Standards.

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Publication:CPI Financial
Geographic Code:6KENY
Date:Sep 9, 2012
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