Foreign Currency

BOA Kenya taps Sh1.3bn for foreign currency lending

Bank of Africa (BOA) Kenya tapped $10 million (Sh1.3 billion) loan in the financial year ended December for on-lending in foreign currency amid a widespread dollar shortage that was being reported in the market.

The bank says in its latest annual report that its parent firm, BMCE Bank of Africa, which owns a 72.41 percent stake, lent it the money with a repayment period of three years.

“An unsecured three-year term loan of $10 million from BOA Group SA for the development of the bank’s lending business in foreign currency,” said the lender.

BOA Kenya is controlled by Luxembourg-incorporated BOA Group SA, with its ultimate parent being BMCE Bank which is incorporated in Morocco.

The dollar loan points to the interventions that banks were using to provide dollars to their clients in the year banks’ exchange rate was misaligned with that of the Central Bank of Kenya for most of the months.

BOA Kenya’s clients are mostly businesses, including those in import/export operations that require foreign currency to settle their bills.

Many businesses reported struggles in accessing dollars to meet their import needs.

The lender says the loan, whose maturity is the end of 2026, bears an interest rate referenced to the Secured Overnight Financing Rate (SOFR) and is payable semi-annually. The SOFR is a global benchmark rate based on transactions in the US Treasury repurchase market.

The effective interest rate on the loan at the end of December was 8.29 percent.

BOA Kenya commercial loan book closed the year at Sh8.49 billion, making up 44.7 percent of the Sh18.99 billion gross loans and advances at the end of the review period.

The lender has not disclosed how much of its lending during the year was dollar-denominated. Net loans and advances during the year fell to Sh16.83 billion from Sh18.83 billion, translating to a 10.6 percent decline.

BOA Kenya’s borrowed funds more than doubled to Sh2.9 billion from Sh1 billion, partly on the dollar-denominated loan. The dollar loan from BOA Group added to the seven-year loan of €7.3 million (Sh1 billion) that the parent firm had given it in July 2020 to enhance the subsidiary’s capital. The loan, which had an initial five-year principal repayment moratorium, will mature in July 2028.

The effective interest rate on the subordinated debt at the end of December was 8.73 percent compared with 5.8 percent in the previous year.

BOA Kenya made a net profit of Sh280.97 million, being a growth from the Sh195.1 million it had posted a year earlier. This marked the third straight year in profits, having endured a period of losses two years earlier.

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