FMO closes local currency deal to micro-lending bank

The Netherlands Development Finance Company (FMO) has closed and disbursed a US$53mn syndicated mezzanine facility in local currency to Equity Bank in Kenya.

The financing will be used by Equity Bank to support micro-enterprises, small farmers, and low income individuals.
FMO structured the facility as a seven-year subordinated loan facility, qualifying as tier II capital under Central Bank of Kenya regulations.

Out of the US$53mn syndicated deal, FMO took US$25mn-equivalent for its own account, and placed US$28mn-equivalent to European Financing Partners, a joint venture between the European Investment Bank (EIB) and 11 other European development finance institutions.

The currency exchange risk was mitigated by the TCX (The Currency Exchange Fund), making this deal FMO’s largest single borrower TCX transaction in a single currency to date.

Equity Bank has close to 40% of all bank accounts in Kenya’s banking industry on its books, and a similar portion of all loan accounts.

FMO’s investment portfolio is €3.4bn, making it one of the largest bilateral development banks. Due to its links with the Dutch government, FMO is also in a position to take risk that commercial financiers may not yet be prepared to take.