South Africa-based fund Arise lends $50 million to dfcu

Dfcu Group may finalise a rights issue in about six months, allowing Arise to convert its loan into an equity stake

Photo: Edgar Batte/Uganda Business News

Arise, an investment company based in Cape Town, is lending $50 million (Shs179.25 billion) to dfcu Bank to help cover short-term capitalisation of the lender, weeks after it purchased the insolvent Crane Bank.

“The facility was availed on commercially-agreed terms, to enable commencement of the recapitalisation of dfcu Bank in the short term, while complying with regulatory capital thresholds” the fund company’s chief executive, Deepak Malik, said in a statement.

Mr Malik told Bloomberg that Dfcu may finalise a rights issue in about six months, and Arise will take a stake – converting their loan into equity.

Dfcu Bank took over Crane Bank in January, three months after the central bank placed the troubled lender under statutory management. The central bank said dfcu’s bid for Crane Bank beat 12 other institutions.

It was not revealed how much dfcu paid for Crane Bank.

“The acquisition gives us the impetus to achieve our strategic objective of building a robust retail operation with multiple delivery channels whilst consolidating our position as a key player in the SME market segment,” Juma Kisaame, the dfcu managing director says in the statement.

Mr Kisaame adds: “It also supports our goal of promoting financial inclusion in Uganda and we welcome the Arise partnership as a contributor to building a stronger financial sector in Sub-Saharan Africa”.

Arise was founded last year by the Norwegian Investment Fund for developing countries, Norfund, Dutch development bank FMO, and multinational financial services provider Rabobank. It was launched on 2 February.

Norfund and Rabobank are the two biggest shareholders in dfcu Limited, with each holding a 27.54% stake.

At its launch, Mr Malik said “Arise will take and manage minority stakes in Sub-Saharan African Financial Service Providers (FSPs) with the core aim of building strong and stable institutions that will serve retail, Small and Medium Enterprises (SMEs), the rural sector, and clients who have not previously had access to financial services.”

The fund “currently manages assets in excess of USD 660 million and is operational in over 10 countries.”