Kenya Commercial Bank (KCB) Rwanda Ltd yesterday signed a loan agreement worth US$5m with the International Finance Cooperation (IFC) that will see the former provide funding for affordable mortgages for home owners and borrowers in the country.
The financing is part of a total package of US$ 105 million IFC invested to support KCB’s regional SMEs and mortgage lending business.
IFC’s loan will be denominated in Rwandan Francs, arranged through a unique swap agreement with the National Bank of Rwanda, and designed to mitigate risks for borrowers by limiting foreign currency exposure.
The swap facility is expected to encourage long-term local currency funding to spur economic development.
The KCB Rwanda Managing Director, Maurice Toroitich, and the KCB Group’s Chief Business Officer, James Agin, signed on behalf of the bank while IFC was represented by Thande Kariuki, Senior Investment Officer, Global Financial Markets Department at IFC.
KCB will use the loan to support its housing finance activities in Rwanda, generating economic growth and job creation through linkages with other key sectors such as construction and capital markets.
After the signing ceremony, Toroitich said that one of the biggest problems banks in Rwanda face is accessing long term loan financing, observing that business people need such from international institutions but cannot access it.
“So, we are indeed very proud that IFC has afforded KCB Rwanda the long term financing and in Rwandan francs and we think this will go a long way in financing our customers needs for long term financing,” he said.
“This will be mainly channelled to SMEs and mortgage financing operations. We now have the opportunity to meet the needs of our customers and it will also allow us the opportunity to manage our balance sheet”.
Toroitich said that the fund will boost the bank’s stability and liquidity given that it is still struggling to break even as a result of operational and expansion costs. KCB has not recorded profits since its entry in the market as it continues to penetrate the country.
KCB is the largest bank by assets and branch network in East Africa, with an SME customer base of 100,000 clients.
The IFC representative said that the financing arm of the World Bank is committed to engage with local banks to provide financing aimed at supporting development, noting that the engagement with KCB is part of a much wider program.
“IFC is committed to financing the private sector as a way of changing the livelihoods of the people and we believe mortgage financing is one of the important areas through which lives can be changed,” Kariuki said.
IFC, a member of the World Bank Group, is the largest global development institution focused exclusively on the private sector.