Church-owned microfinancier SMEP has announced a second rights issue in just under four years in a bid to reduce the majority shareholder’s stake in the firm to below the Central Bank’s maximum threshold as well as cater for expansion plans.
SMEP’s board of directors has resolved to issue 260 million ordinary shares at Sh5 per share.
This, subject to shareholder and regulatory approval, will raise Sh2.4 billion.
The microfinancier said funds will be utilised to fund its branch network expansion to fifty with a targeted asset base of Sh22 billion and an anticipated 2 million customers.
In a notice, the firm said Wednesday that it is seeking shareholder approval, at the annual general meeting (AGM) scheduled for May 6, to issue more shares which will reduce the National Council of Churches of Kenya’s (NCCK) stake to enable it meet the CBK’s deadline.
CBK regulations only allow finance institutions and the government to own not more than a quarter of shares of lending institutions.
“That pursuant to Article 56 of the Articles of Association of the Company, the authorized share capital of the Company be increased from Sh1.1 billion divided into 220 million ordinary shares of Sh5 each to Sh2.4 billion by the creation of 260 million ordinary shares of Sh5 each,” said SMEP in a notice.
“To enable the Company raise additional capital for its business and to comply with the divestiture conditions set by the Central Bank of Kenya pursuant to the Micro Finance Act,” it added.
NCCK owns nearly three quarters of the Deposit Taking Microfinance (DTM) institution, which the regulator requires it to reduce to 25 per cent and below.
In January, NCCK general secretary Canon Peter Karanja disclosed that NCCK had agreed to cede part of its shareholding to meet the CBK conditions ahead of it becoming a fully-fledged bank.
In late 2012, NCCK floated a rights issue, which if fully subscribed would have reduced the church’s stake to 31.86 per cent but poor uptake resulted in it reducing its stake to only 73.72 per cent.
The initial SMEP offer, approved by the Capital Markets Authority (CMA), sought to raise Sh1.6 billion by issuing 145.5 million shares at Sh11 each, but only managed to get Sh266 million equivalent to 16.7 per cent subscription.
The money from the rights issue was to increase the micro-lender’s working capital (Sh900 million), go towards revamping the ICT system (Sh200 million), branch expansion (Sh200 million) and Sh300 million was to be used to construct a new office block.