ECONOMYNEXT – Sri Lanka’s LOLC Holdings has been given the nod by authorities in Kenya to buy Key Microfinance Bank Plc, a media report said.
LOLC Holdings Plc has been authorized to buy 73.2 percent of the company, formerly known as Remu for 237 Kenyan shillings, Business Daily Africa reported.
LOLC had been exempted from the country’s micro-finance act which places an ownership limit of 25 percent for four years according to a gazette notice dated February 03, the report said.
Documents sent to shareholders for approval show that LOLC is planning to buy 73.29 per cent stake in the microlender in what will make it the anchor owner and cutting a stake held by Fusion Capital to 6.1 per cent, Business Daily said.
LOLC will buying 31.4 million shares at a price of 7.54 shillings each, valuing the transaction at 237.4 million shillings or about 422 million rupees.
LOLC made large profits from investing in Cambodia after its central bank printed money, the currency collapsed and the economy dollarized, making it impossible for the monetary authority to further generate monetary instability and social unrest.
With the central bank emasculated the currency is fixed at 4,000 to the US dollar, circulating along with the dollar, though there are attempts including by the International Monetary Fund to get ‘monetary policy’ to work again and de-dollarize the country, despite its history of social unrest from central banking.
Severe currency depreciation form the collapse of the Bretton Woods up to 1975 brought the then Monarch of Cambodia disrepute, helped bring Polpot to power. Polpot promptly abolished money in Cambodia in a remarkable move.
LOLC is buying the Kenyan firm through a subsidiary in the Mauritius, which is a financial centre. Mauritius had the first currency board in Asia set up by British authorities in 1849. Ceylon’s currency board was set up in 1885.
Like Sri Lanka’s rupee, the Mauritian rupee started at 4.70 to the US dollar, but as the currency board was increasingly given central banking power (printing money to fix interest rates) the rupee weakened, especially after 1980 as monetary policy was tightened in the US and UK.
Its central bank was set up under British advice in 1966 was less activist until around 1980 giving stability.
The Maritius rupee had fallen from 4.70 to the US dollar to around 42, compared to 200 in Sri Lanka (parallel exchange rate in excess of 240) but there are no exchange controls. (Colombo/Feb09/2022)