Equity Group Holdings #ticker:EQTY is betting on an increase in its US dollar holdings to fund the growing cross-border transactions in East Africa and beyond.
The lender says it now holds $4 billion, equivalent to 41 percent of its Sh1.07 trillion balance sheet, enhancing its capacity to offer loans and letters of credit to multinational firms.
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 share of dollars in Equity’s balance sheet has risen from 23 percent last March due to acquisition of Banque Commerciale Du Congo (BCDC) and the 63 percent jump in borrowing to Sh89.6 billion.
“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,” said James Mwangi, Equity Group CEO.
“We have seen huge opportunity in Continental Free Trade Area and the pace at which regional businesses are doing cross-border businesses.”
Mr Mwangi said the immediate opportunities for clients in export business are around the manufacture of personal protective equipment given the Covid-19 environment.
Equity’s entire Sh320 billion DRC balance sheet is in dollars, lowering the risk of translation costs as is seen with banks in markets such as South Sudan.
DRC in 2019 made an application to join the East African Community and Equity believes this and the improving regional trade relations across East and Central Africa will boost regional cross border trade.
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 were from institutions such as IFC, Proparco, European Investment Bank, African Development Bank and African Guaranty Fund.