MICROCAPITAL STORY: Kenya's K-Rep Bank Records Loss in Profits, Receives New Capital from IFC, African Development Bank, Shorecap International, Triodos, FMO, K-Rep Group

K-Rep Bank CEO Kimanthi Mutua attributed a recorded loss in profit totalling Sh 209 million (USD 2.6 million) to post-election violence and massive investment in the bank’s information and communication technology (ICT) infrastructure. The Daily Nation reported that Kenya’s K-Rep Bank reported a loss in profit according to an unaudited financial report ending September 30, 2008. The majority of K-Rep clients are low-income entrepreneurs located in neighbourhoods that were badly affected by the post-election violence. Shareholders have injected an additional Sh 1 billion (USD 12.7 million), which will be used to diversify and create new products to increase the bank’s market share and further develop ICT infrastructure, such as Temenos 24. In September 2007 K-Rep Bank reported profits of Sh146 million (USD 1.86 million).

The bank is confident that many of its customers affected by post-election violence will recover and maintain their relationship with the bank. Additionally, Mutua has stated that the growth potential in the microfinance sector is big, as “only a small percentage of the bankable population has access to suitable financial services” and that “the huge financial injection from our shareholders is a clear indication of the confidence, commitment and the potential of the country’s micro finance sector”. The breakdown of its shareholders is: K-Rep Group (25 percent), International Finance Corporation (16.7 percent), the African Development Bank (15.1 percent), Triodos (11.0 percent), Kwa (ESOP) (10.0 percent), ShoreCap International (8.2 percent), Founding Members (5.2 percent), The Netherlands Dev. Finance Co. (FMO) (5.0 percent) and ICDC-I (Public Investment Company) (3.8 percent).

K-Rep Bank is a commercial bank that targets the microfinance sector and provides a range of banking services. It was founded as an intermediary organization in 1984 providing funds to non-governmental organizations (NGOs) for microfinance and expanded to work on USAID’s Private Enterprise Development Project in 1987. In 1997 K-Rep Bank Limited was formed as a subsidiary of K-Rep Group, a Kenyan development agency involved in microfinance, and in 2000 it became the first commercial bank in Kenya to directly target low-income clients. At the end of 2007 it had over 153 thousand active borrowers, 64 percent of which were women, and the average loan balance per borrower was USD 529. Its assets at the end of 2007 totalled USD 110 million with a debt to equity ratio of 591 percent and return on assets of 2.2 percent.