Equator Capital Partners has raised its shareholding in Jamii Bora Bank to 15 per cent after injecting Sh600 million cash into the tier three lender. This underlines gradual consolidation in the banking industry.

The SME-focused bank announced yesterday it has received the cash from the US private equity firm through its managed fund, ShoreCap II.

In April, Jamii Bora said it had raised Sh1.2 billion from Equator and Progression Capital Africa. Equator Capital Partners is a private equity fund management which invests in inclusive financial services entities in developing and transitional economies.

Their investment in JBBL is a testament to our sound strategy, stable financial position and commitment to creating tangible impact and enhancing banking value offered to SMEs across Kenya, Jamii Bora CEO Sam Kimani said in a statement.

The deal underscores the emerging trend of mergers and acquisition as banks move to re-position themselves under the new banking law through innovation.

The industry is coming to terms with the Banking (Amendment) Act, 2016 which caps lending rates at four per cent above the Central Bank Rate, currently at 10 per cent.

This has slowed down credit, a hit to the banks interests earnings, forcing some of them to lay off staff, while adopting digital platforms.

Economists at Cytonn Investments said on Monday the industry should expect more mergers. Maurice Oduor, the firm’s investment manager, said more international banks are likely to come into the country.

Two things that will shape mergers and acquisition: one, the entry of foreign banks through acquisition and number two will be local banks operating in this banking space but have common shareholders, Oduor said.

A number of deals have been sealed so far. They include the acquisition of a 10.68 per cent stake in I&M Holdings by UK government- owned CDC Group in April.

CBK also cleared the acquisition of a 51 per cent stake in Oriental Commercial Bank by Bank M of Tanzania in June. Mauritian SBM Holdings is also set to buyout Fidelity Commercial Bank by end of the year.

It is a transitional period for the Kenyan banking industry. We believe Jamii Bora Bank strategic focus as an SME lender strongly resonates with our investment approach, Equator Capital Partners director of Africa investments Nathalie Gabala said.