Competition Authority of Kenya (CAK), on Friday, May 26, authorised the sale of a local bank to a strategic investor for Ksh571.8 million.
The bank was founded by a local Christian organisation and had operating in Nairobi and other parts of the country since 1996.
In January 2023, the shareholders of the Church-based bank held an Extraordinary General Meeting (EGM) and approved the sale waiting for the government's green light.
"The Competition Authority of Kenya (CAK) has approved the acquisition of 51 per cent of all issued ordinary shares of the bank by a strategic investor, unconditionally.
"Approval has been granted based on the finding that the transaction is unlikely to impact competition concerns nor elicit negative public interest concerns negatively, the two key considerations during merger analysis," read part of a statement by CAK.
The bank provides loans and other financial services to small and medium-sized enterprises (SMEs) and individuals within the Church fraternity and beyond.
Sale of the bank was part of a broader effort to turn around its financial performance, as it has been struggling with profitability in recent years.
Competition Authority of Kenya noted that the investor buying the bank is a leading financial institution with a strong track record of success in the banking sector.
"The acquirer is a wholly-owned subsidiary of a charitable entity registered in the United States of America. It is involved in various activities, including holding, developing and managing investments in micro-enterprise development organizations.
"The target entity is a public company incorporated in Kenya. The bank offers financial services focusing on group, SME and church banking," CAK noted.
Competition Authority of Kenya recognised the bank as one of the largest microfinance institutions in the country, and its sale is a sign that the sector is attracting increasing interest from investors.
The bank sale is also a positive development for the Kenyan economy. It provides financial services to many SMEs and individuals, and its sale is expected to help these businesses grow and create jobs.
"The transaction, therefore, qualified as a merger within the meaning of Sections 2 and 41 of the Competition Act No. 12 of 2010.
A merger, or takeover, may occur when an undertaking directly or indirectly acquires control over another business within Kenya according to the Act.
"This may happen through, among others, purchase/lease of shares, exchange of shares, vertical integration," CAK adds.
CAK noted that market shares of microfinance institutions are based on a weighted composite index that considers the entity’s assets, deposits, capital, number of active deposit accounts, and active loan accounts.
The resultant classification places these banks into three peer groups; large (5 per cent and above), medium (between 1 per cent and 5 per cent), and small (less than 1 cent)," CAK noted.
