Mortgage financier HF Group has received Sh1 billion from its top shareholder Britam Holdings to boost the lender’s capital and loans outside real estate.
The cash injection will enable HF to deepen its strategy of expanding into mainstream banking including retail and SME lending while cutting reliance on the soft real estate market.
The mortgage financier will channel the bulk of its lending to small and medium enterprises and those buying houses through the State-backed affordable homes scheme.
Britam cash will help HF meet the regulatory capital levels, boost the firm’s liquidity and allow it to lend more through its deposits backed by the enhanced reserves.
“The investment comes on the back of a formidable turnaround strategy that is poised to see the business transform into a full-service bank,” HF’s chief executive Robert Kibaara said in a statement.
“This is indeed a major vote of confidence informed by the results already being witnessed through our business transformation initiatives.”
The firm’s total capital to total risk weighted assets ratio stood at 11.21 per cent in September 2020 against the statutory minimum of 14.5 per cent.
This meant that it needed to raise its capital buffers to grow its loan book.
Britam, which owns 48.22 per cent stake in HF, has backed the turnaround.
“Our support will allow the bank to grow its full-service banking offering, deepen penetration of banking services and promote financial inclusion for all.
This demonstrates our confidence in the transformation strategy of HF Group,” Britam’s outgoing chief executive Benson Wairegi said in a statement.
HF is seeking to grow into mainstream banking after the real estate development and mortgage financing — which previously generated most of its profits — suffered from a mix of defaults and reduced demand for housing.
The government says small and medium enterprises account for more than 80 per cent of all the businesses in the country, provide about 75 per cent of jobs, and about 30 per cent of the annual gross domestic product.
HF is seeking a larger share of this market, which has long complained about the lack of access to credit, or of being charged high interest rates due to a perception by lenders that they are too risky.
The lender stopped building new houses but retains a presence in the real estate business through financing home buyers.
“The capital will also boost HF Group’s strategy focusing on end-user financing for affordable housing and create opportunities for Kenyans in the middle-income bracket to own homes,” HF said in a statement.
“The group has signed agreements with the National Government to finance buyers of Park Road affordable housing projects and private sector developers, including real estate developer Tecnofin Limited, which is developing 1,562 affordable housing units in Pangani.”