CAK gives nod to proposed acquisition of 78% shareholding of Sumac Microfinance Bank by US-based Moniepoint Inc
It says the transaction qualified as a merger within the meaning of sections 2 and 41 of the Competition Act Cap 504 (the Act) of the Laws of Kenya
The Competition Authority of Kenya (CAK) has approved the proposed acquisition of 78 per cent shareholding of Sumac Microfinance Bank Limited by United States-headquartered Moniepoint Inc unconditionally, noting that the transaction is unlikely to negatively impact competition in the market for provision of microfinance banking services in Kenya, nor elicit negative public interest concerns.
In a statement, CAK said the transaction qualified as a merger within the meaning of sections 2 and 41 of the Competition Act Cap 504 (the Act) of the Laws of Kenya.
“The Act stipulates that a merger, or takeover, may occur when an undertaking directly or indirectly acquires control over another business within Kenya. This may happen through, among others, purchase/lease of shares, exchange of shares, vertical integration. Further, merging parties whose combined turnover or assets, whichever is higher, is over Ksh 1 Billion are required to seek approval from the Authority prior to implementing the transaction. The transaction between Moniepoint Inc. and Sumac met this threshold for mandatory notification and full analysis by the Authority as provided in the Competition (General) Rules, 2019,” the statement said.
“During merger analysis, and in order to determine the impact that a transaction will have on competition, the Authority identifies the relevant product market as well as the relevant geographical market. The relevant product market comprises products/services that are interchangeable or substitutable by the consumer due to their characteristics, prices and/or intended use. Based on this criterion, the relevant product market for the proposed transaction is the market for provision of microfinance banking services.”
Determination of the relevant geographic market involves interrogating the area in which merging parties undertake the business and in which competition conditions are sufficiently similar. The target to the proposed transaction offer its services across the country and, therefore, the relevant geographic market is national.
Microfinance institutions in Kenya are classified into two categories. Community-based microfinance banks operate within specific regions and have lower capital requirements. Nationwide microfinance banks operate countrywide and higher capital requirements.
Kenya has 14 microfinance banks, classified into three peer groups based on market share: large (above 5 per cent), medium (1 per cent-5 per cent), and small (below 1 per cent). Market share is determined by a weighted composite index that includes assets, deposits, capital, active deposit accounts, and active loan accounts. According to the Central Bank of Kenya’s 2023 Annual Report, these classifications reflect the microfinance banks’ relative size and influence in the sector.
As of December 31st, 2023, there were five large microfinance banks with a combined market share of 63.8 per cent, six medium microfinance banks with 15 per cent, and three small microfinance banks with 12 per cent.
Sumac is ranked as a medium player and has a market share of 4.3 per cent. This mark share which will not change as a result of this transaction since Moniepoint Inc has no operations in Kenya. Therefore, post-merger, the structure and concentration of the market for microfinance banking will not be affected. As such the transaction is unlikely to raise competition concerns.
Premised on the foregoing, the proposed transaction is unlikely to result in substantial lessening or prevention of competition in the market for provision of microfinance banking services in Kenya.
During merger analysis, the Authority also considers the impact that a proposed transaction will have on public interest. Public interest in this case refers to various economically inclined concepts that, when considered, protect the welfare of the Public. In the Competition Act, some of the public interest considerations are extent to which a proposed merger would impact employment opportunities; impact on competitiveness of SMEs; impact on particular industries/sectors; and
impact on the ability of national industries to compete in international markets.
As per the parties’ submissions, this transaction will not result in negative public interest issues. Specifically, there will be no employment loss and all the current employees of will be retained under the current terms.
Moniepoint Inc has two subsidiaries incorporated in Nigeria – TeamApt Limited and Moniepoint Microfinance Bank Limited.
Established in 2002, Sumac Microfinance Bank Limited is involved in monetary intermediation, financial leasing, insurance agency and brokerage, deposit-taking and lending, money transfer services, and forex trading.
