Equity eyes funding of cross-border transaction

Equity Holding Group in March saw an increase in their dollar holdings, and now the bank is planning on funding cross border transactions.

Inclusion Times
Inclusion Times

Equity Group holdings in recent times have seen a rise in its US dollar holdings, and the bank is banking on this increase to support the growing cross border transactions in East Africa and beyond.

"The biggest opportunity is the funding of cross-border transactions. The ability to deploy the resources within the Group has been made very easy and flexible with this dollar balance sheet. We have seen huge opportunities in Continental Free Trade Area and the pace at which regional businesses are doing cross-border businesses." James Mwangi, Equity Group CEO.

The Group boasts of $4 billion holdings, equivalent to 41 per cent of its Sh1.07 trillion balance sheet. The implication of the above figure is the increase in the company's capacity to offer loans and letters of credit to multinational firms.

According to regtech, the rise in dollar resources at the end of March comprise deposits and long-term borrowings from global lenders such as the International Finance Corporation (IFC). The acquisition of Banque Commerciale Du Congo (BCDC) by Equity and the 63 per cent increase in borrowing to Sh89.6 billion has been attributed to the 23 per cent increase of dollars holding in March.

Speaking of borrowing, Equity has been aggressive in long term borrowings since the onset of Covid-19, receiving more than Sh63 billion in under seven months. The loans IFC, Proparco, European Investment Bank, African Development Bank and African Guaranty Fund.

The company has an advantage in the market in which it operates because its entire Sh320 billion DRC balance sheet is in dollars. This lowers the risk of translational costs, as seen with banks in markets such as South Sudan.

The move by DRC in 2019 to join the East African Community and the improving regional trade relations across East and Central Africa has been touted by Equity to be significant drivers of regional cross border trade.

Kenya in focus

GDP: $95.503 billion compared to Uganda's $35.165 billion in 2019

Population: 52,573,973 compared to Uganda's 44,269,594 in 2019

GDP per capita: $1,816 compared to Uganda's $794 in 2019

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