Struggling Top Finance Bank sold to Djibouti’s Salaam African Bank

A Djibouti-based bank, Salaam African Bank (SAB) has acquired Uganda’s Top Finance Bank Limited (TFB).

Bank of Uganda (BoU), the financial sector regulator announced the acquisition today on Monday 8^th August 2022.

“This is to inform the general public that MA Salaam African Bank (hereafter SAB) with its Headquarters in Djibouti has acquired Top Finance Bank Limited (hereafter TFB),” the central bank announced.

Top Finance Bank (TFB) was registered on 14th June 2012 as a company limited by shares to provide financial services in Uganda.

“This transaction was concluded following Bank of Uganda approval ‘in accordance with provisions of the Financial Institutions Act (FIA), 2004 Ms amended) and its implementing Regulations,” it added.

According to Bank of Uganda, SAB was established in 2007 and is licenced and regulated by the Central Bank of Djibouti.

TFB was registered in Uganda as a company on the 14^th day of June 2012 and was granted a Credit Institution Licence (Class 5) on 8^th September, 2014.  

“SAB also has presence in Ethiopia, through a representative office and in Kenya through Salaam Microfinance Bank Limited and Salaam Investment Bank Limited which are licenced by the Central Bank of Kenya and Markets Authority of Kenya, respectively,” reads an excerpt from the BoU statement released on Monday 8^th August 2022.

Top Finance Bank is at the bottom of the 5 licensed MFIs with UGX11.6 billion in assets as at the end of 2021 (1.5% market share). In 2021, Top Finance saw its assets decline by 14.7% from UGX13.6 billion, largely due to a 36.5% decline in lending from UGX9.6 billion in 2020 to UGX6.1 billion in 2021. Reduced lending also negatively impacted on income, which reduced by 36.8% from UGX3.8 billion to UGX2.4 billion.

The MDI registered a minuscule 3.3% growth in deposits, from UGX12.1 billion to UGX12.5 billion.

Tight cost management however saw the company cut on its losses- from UGX3.6 billion to a loss of UGX2.3 billion.

Licensed on 8th September 2014, Top Finance Bank has been struggling, in a market dominated by the government-owned Pride Microfinance (51.2% assets market share) and Finca Uganda (25.7% assets market share).

The bank’s acquisition comes amid growing financial anguish that is negatively affecting many companies that are operating in Uganda, which has not spared financial institutions.

This international transaction brings to the fore two related mega transactions, that recently took place last year and in 2022.

I&M Holdings Plc. in 2021 acquired 90% shareholding in Uganda’s privately-owned financial institution, Orient Bank Ltd (OBL) as part of its regional expansion plan.

I&M bank has Ksh358.09 billion ($3.34 billion) worth of assets and a total of 79 branches in Kenya (41 branches), Rwanda (18 branches), Tanzania (8 branches) and Mauritius (12 branches).

In May this year, Afriland First Bank made a formal request to BoU to voluntarily exit Uganda shortly after two years after it was granted a license in September 2019.

Commercial banks in Uganda and elsewhere are reducing their branch networks in a bid to cut costs.

This new trend has compelled banks to become more reliant on agency banking which has empowered Ugandans with the ability to access financial services within close proximity to their homes, workplaces and residential areas at 10,000 agencies, which is a giant stride up from less than 600 bank branches that were in existence four years ago.