NIC Bank Tanzania will benefit from Tsh8.5 billion ($5.2 million) of additional capital injected its shareholders to boost its lending capacity to corporate and SME clients.
The new capital will be disbursed in two tranches. NIC Kenya said on Wednesday it had already released $3.5 million, with the balance ($1.7 million) coming from the other local shareholders of NIC Bank Tanzania, expected no later than June.
NIC Tanzania last year raised $5.2 million from a rights issue, which raised the shareholding of the Nairobi-based parent company to 68.9 per cent. Previously, the parent firm held a 51 per cent stake in the Dar-based subsidiary.
The new money — which now raises NIC Kenya’s stake in the Dar es Salaam unit to 74.6— executives said, will be used to fund the bank’s business plan in the coming year.
“A growing financial need in this market has required that NIC Bank Tanzania further grow its competitive position and market share with a focus on corporate and SME lending,” NIC Bank Tanzania managing director Pankaj Kansara said.
Kenyan banks have over the past few years been growing their presence in the East Africa region. Last month, Commercial Bank of Africa (CBA) set up shop in Uganda. CBA joined a list of eight other Kenyan lenders who have subsidiaries in Uganda among them Equity, KCB, Diamond Trust, Fina and NIC Bank.
CBA already has a presence in Tanzania and has ambitions to open more subsidiaries in South Sudan, Rwanda, Burundi, Ethiopia and the Democratic Republic of Congo.
NIC started operations in Uganda two years ago where it wholly owns the subsidiary, which returned a loss of Ksh24 million ($283, 354) in the first year.
NIC is one of the leading SME especially in trade and asset financing in Kenya, something the Tanzanian bank wants to replicate.
“Looking at the success of our parent company, we hope to leverage on these strengths and replicate the product offering in the Tanzania market where applicable,” said Mr Kansara.
NIC Tanzania is banking on the emerging opportunities in asset finance, trade finance and infrastructure project financing to increase its market share, driven by an improved business framework that has helped attract foreign direct investments and spur SME growth.
The bank said the additional capital will partly finance the growth of the anticipated loan book for 2014 and cushion the bank’s non-performing loan book.
NIC Bank Tanzania has grown its balance sheet from $18.3 million in 2009 to $110.3 million in 2013, representing an annualised growth of 43 per cent.
The bank has also entered into an insurance deal with the Africa Trade Insurance Agency (ATI) to protect its entire portfolio of trade finance borrowers against the risks of insolvency and non-payment.
The ATI product will help the bank extend credit facilities such as short term loans, invoice discounting, bank guarantees and letters of credit without the requirement of the standard tangible security, a major win for small and medium-scale enterprises.
Demand for credit by the private sector increased by 14.6 per cent in the year ending November 2013, according to the most recent data from the Bank of Tanzania, up from 13.7 per cent in the corresponding period the preceding year.