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Central Bank of Kenya (CBK) Governor Dr. Patrick Njoroge has asked lenders to shore up their core capital to enable them grab a share of the lucrative infrastructure financing business.
Boosting the respective capital bases would the lenders’ ability to stave off competition from foreign finance providers.  “Given the considerable financial outlays involved in infrastructure projects, commercial banks would need to enhance their capital base to participate in Public Private Partnerships while remaining compliant with regulatory requirements”, Dr. Njoroge said.


Dr. Njoroge was speaking during the launch of the fourth Kenya Bankers’ Association Annual Banking Research Conference Centre in Nairobi where he addressed the first public forum since his appointment at the end of June as governor.
Banks are allowed to lend a maximum of 25 per cent of their core capital to a single borrower, cutting them out from financing huge infrastructure projects whose budgets are often in the hundreds of billions.
Dr. Njoroge said the nature of many infrastructure projects were long-term with current investments generating cash-flows several years after project inception.  However, the maturity of most bank deposits in short-term which required the need for banks to manage this intermediation.
Banks could consider alternate sources of longer-term funding from development finance institutions such as the Africa Development Bank which provide funds for onward lending to such projects.  Already, local commercial banks were exploring alternative avenues like syndicating credit facilities, as was the case with the Kshs.50 billion – worth project to develop the Nairobi – Mombasa pipeline commissioned by the Kenya pipeline corporation.
Six commercial banks, including CFC Stanbic, Commercial Bank of Africa, Citi Bank, Co-operative Bank of Kenya, Standard Chartered and South Africa’s RMB Bank are jointly funding the pipeline project, but none of them had the capacity to loan to the project singly, partly due to prudential guidelines requirements.
Kenya Bankers Association Chief Executive Officer Mr. Habil Olaka said most banks had the capacity to be engaged in syndicated lending, effectively enabling them to take part in much bigger projects.  He added that the banks were keen on funding projects that would be the link between agricultural productivity and infrastructure.
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