KCB has joined Equity Bank in the scramble to finance KES 3.5 trillion trade deals in the Democratic Republic of the Congo as the banking supremacy battle goes regional.
Last week, KCB announced the completion of its acquisition of the Democratic Republic of the Congo’s Trust Merchant Bank SA (TMB) for more than KES 15 billion, giving the bank a foothold in the vast mineral-rich Central African country.
“We are looking at trade finance as a big product to facilitate cross-border trading,” said KCB Chief Financial Officer Lawrence Kimathi.
Mr Kimathi added that the acquisition would also help the lender expand its loan book, noting that since announcing the deal with TMB, the lender has received a pipeline of KES 28 billion in facilities from sectors such as energy, cement manufacturing, and mining.
However, KCB is interested in trade financing, which protects parties involved in cross-border trade from risks such as currency fluctuations, political instability, and nonpayment issues.
Equity Bank, which entered the DRC in 2015 with a buyout of ProCredit Bank before expanding its market share in 2020 with the acquisition of Banque Commerciale du Congo (BCDC), reported that trade finance contributed significantly to the growth of its pipeline.
Equity, the region’s most profitable bank, announced that revenue from trade financing — where certain financial instruments and products are used to facilitate international trade and commerce — increased by 60% to KES 3.9 billion in the first nine months of 2022, up from KES 2.5 billion in the previous nine months.
This helped Equity to grow its non-funded income, which includes fees and commissions, in the third quarter of 2022 by 31 per cent compared to 26 per cent in a similar period last year.
“We can be excused and understood, hopefully, if we call ourselves the trade finance bank of the region,” said Equity Bank CEO James Mwangi during an investor briefing last month.
Lending lines, letters of credit, factoring, export credit, and insurance are some of the instruments used in trade finance.
KCB’s entry into the mineral-rich DRC is intended to capitalize on the opportunities presented by the country’s increased cross-border activities in the region.
The Democratic Republic of the Congo (DRC) officially joined the six-nation East African Community (EAC) in July, bringing its more than 90 million population market to the regional trading bloc. This gave Kenya, the only EAC country without a border with DRC, hope for increased trade with the country, with local companies warming up to Kinshasa.
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