Remu Microfinance set for S45m Q1 rights issue to fund small firms

Remu Microfinance Bank is preparing to raise S45 million from its shareholders through a cash call slated for quarter one 2016.

The rights issue is part of the Sh1.7 billion the micro-lender plans to raise over the next three years through a mix of equity and debt.

“Some of the money has already come. Some shareholders have put deposits which they will then convert into shares,” Remu CEO Peter Mugendi told the Business Daily.

He said around 80 per cent of the targeted amount should be in the form of equity injection.

The micro-lender currently has an asset base of Sh400 million. It has some 242 shareholders, including private equity firm Fusion Capital which bought a 25 per cent stake in March 2014 for an undisclosed amount.

READ: Fusion Capital injects cash in microlender

Remu wants to raise the cash to increase lending to its core customer base, largely small businesses with borrowing needs beginning in the tens of thousands but not exceeding Sh7 million. Mr Mugendi said studies had shown that demand is greatest at this level but the market is still underserved.

“Only 30 per cent of those SMEs have bank accounts,” he said.

To tap into this market Remu has partnered with Farm Concern International, an NGO linking farmers to markets. The two have entered into an agreement in which farmers could borrow up to 50 per cent of the value of their warehouse receipts.

Farmers will also borrow to buy farm inputs through a partnership with agrovets. Farm Concern has a network of 13,000 farmers.

The micro lender has in the meantime appointed Stanley Ngaine as its board chairman, Luke Kinoti as deputy chairman and Ken Mbiuki as a member.

Mr Ngaine is a director at Sterling Capital, Mr Kinoti is the chief executive at Fusion Capital while Mr Mbiuki is the founder of Zetech College. The Central Bank of Kenya licensed Remu as a deposit taking microfinance (DTM) in 2011.

Microfinance institutions are forging ahead with capitalisation plans amidst high interest rate environment that has made raising cash difficult.

Faulu recently received Sh1 billion for onward lending to SMEs from the European Investment Bank while Sumac DTM raised Sh100 million from Luxemburg-based Regmifa.

Earlier in the year, Real People raised Sh1.63 billion through a corporate bond that was listed on the Nairobi Securities Exchange.

The microfinance industry’s total assets stood at S17.5 billion as at the end of 2013 from Sh275 billion a year earlier.