African Development Bank supports K-Rep Bank: Invest KShs 174.8 million (US$ 2.2 million) to promote entrepreneurship and economic growth in Kenya
Tunis – 06 May 2009 - The Board of Directors of the African Development Bank (AfDB) Group approved financing of KShs 174,800,000 (US$ 2.2 million) to support K-Rep Bank in Kenya.
K-Rep is distinct from other commercial banks or financial institutions, because of its social mission of providing financial services to low income and poor urban and rural people who do not have access to commercial banking services as means of building an asset base for themselves.
After K-rep’s conversion into a commercial bank, it has increased its service offering to its target clientele from purely credit to full banking service. Consequently, its overall performance has been consistent across all dimensions, including assets, profitability, loans and deposits, branch network, customer base and, most importantly, its product portfolio. Its innovative business model (the Grameen model) has kept the administration costs of small loans manageable and the default rate very low.
The investment is in line with the priorities of the Kenyan government as outlined in its Vision 2030 and Medium-Term Plan (2008-2012). Priorities focus on employment generation, improvement of livelihoods in the poorer regions of the country, and poverty reduction.
The project is also aligned with the African Development Bank’s recently approved Country Strategy Paper (CSP) for Kenya for the period 2008-2012 and in particular its pillar II which focuses on employment generation as the most urgent challenge facing the government in its bid to address the socio-economic pressures and reconstruction needs arising from the post election crisis in 2008 and to reduce poverty. The Bank’s medium-term strategy has placed support for the private sector among the institution’s priorities.
The project is consistent with AfDB’s updated Private Sector Operations Strategy which emphasizes mainstreaming microfinance into the formal financial sector in Regional Member Countries. The financial package for K-rep is similar to packages recently approved by the Bank for Access Bank of Tanzania, Advans Congo, Liberia and AB Microfinance Bank Nigeria in that its financial support includes technical assistance for capacity building, thereby strengthening the sustainability of the project.
The project’s key development outcomes consist of job creation and access to finance for the poor. This investment is expected to have valuable mid-term development outcomes, by contributing to the deepening of the microfinance industry in compliance with best practice, in a country where the sector is still under- developed, bridging the financing gap for growth-oriented micro and small enterprises (SMEs); supporting the creation and growth of viable micro enterprises; increasing income among micro-entrepreneurs and generating employment. K-rep Bank plans to create about 10, 000 new jobs by 2011, 55% of which would involve women entrepreneurs.