Implications of Centenary bank’s acquisition of a Malawian bank

On October 18, 2022, Catholic church-owned Centenary Rural Development Group, the holding group of Centenary Bank and the Catholic Archdiocese of Lilongwe acquired 100% shareholding in MyBucks Banking Corporation, Malawi.

Centenary Bank’s purchase of MyBucks is the former’s first foreign acquisition of a financial entity.

This was announced in a joint press statement signed by Dr Francis Z. Pelekamoyo, the Board Chairman, MyBucks Banking Corporation, Malawi; Prof. John Ddumba-Ssentamu, the Centenary Group Chairman and Most Rev. George Desmond Tambala, the Archbishop of the Catholic Archdiocese of Lilongwe.

“MyBucks Board of Directors would like to inform its valued customers and the public that the potential investor (a consortium of two institutions namely Centenary Rural Development Group Limited from Uganda and the Catholic Archdiocese of Lilongwe) has submitted a final binding offer to acquire 100% shareholding in the bank. The submission of the final binding offer comes after three months of conducting due diligence on the bank,” the statement reads in part.

MyBucks Banking Corporation

This follows a confirmation in April 2022 that MyBucks S.A, the parent company was declared bankrupt in December 2021.

MyBucks is a financial institution that has been in an expansion overdrive since its establishment. It was incorporated in 2015 as the New Finance Bank. MyBucks S.A acquired 50% of New Finance Bank in 2017. New Finance Bank acquired Pride Malawi, a microfinance bank in 2018.

In 2019, MyBucks S.A acquired 100% of New Finance Bank, merged it with GetBucks – a microfinance company it owned – and rebranded to MyBucks Banking Corporation. The bank acquired Nedbank Malawi in 2020.

Centenary Group Executive Chairman Prof. John DdumbaSsentamu in an interview with The African Report reveals that the takeover will give Centenary Bank an international image.

“After years of success in Uganda, the shareholders thought it is high time we go beyond the boundaries of Uganda and the opportunity presented itself when the group was approached by the Archdiocese of Lilongwe, who informed us that the bank that was on the market,” he says.

He further shares that the bank will be named “Centenary Bank Malawi.”

Centenary Group Executive Chairman Prof. John Ddumba-Ssentamu
Centenary Group Executive Chairman Prof. John DdumbaSsentamu

“We already have a new name. The bank will be modelled to operate like a microfinance institution. Its focus will be extending banking to the rural communities bringing into the banking fold 60% of Malawi population, which is unbanked,” says Prof Ddumba.

Just like Centenary Bank’s model, Prof Ddumba shares that MyBucks bank will use a microfinance model by going to rural areas.

“Micro-finance experts to restructure and rebrand the bank will be brought from Uganda. This bank has several branches throughout the country. We are going to change management and I am sure things will turn around,” he says.

The bank was founded in 1983 as a credit trust, Centenary Rural Development Trust (CRDT), by Simeon Lutaakome, Hugh Francis Pulle, Paul Kateregga, Vincent Kirabo kya Maria, Emmanuel Mpande and John Ogutu.In 1985, CRDT began to provide financial services to the public.

The bank became a fully licensed commercial bank in 1993, after receiving a license from the Bank of Uganda and as of May 2016, Centenary Bank was the largest majority indigenous Ugandan commercial bank.

Financial expert Mr Andrew Muhimbise in agreement with Prof Ddumba says Centenary will become “a multinational banking group,” if it succeeds. He notes that management may have wanted to show the bank’s growth since its momentum has been slowing down.

He, however, argues that the Catholic Archdiocese of Lilongwe being a shareholder without banking sector experience will be a double-edged sword.

Mr Muhimbise says Centenary Bank has also been facing cut-throat competition from Equity Bank, which is taking a slice of its traditional customers – ordinary Ugandans – through agency banking.

He warns that the acquisition could be fraught given the challenges experienced by other banks in the regions that have been acquiring other financial institutions.

Centenary bank branch in Kampala

Uganda is littered with such examples. DFCU Bank has been struggling following the acquisition of Crane Bank Limited in 2017. Crane Bank also struggled after acquiring other local banks and Equity Bank had to completely reform a microfinance institution it bought in Uganda in 2018.

He advised that Centenary Bank would have invested in the Democratic Republic of Congo (DRC) where banks like Kenya Commercial Bank (KCB) and Equity have invested.

“I think they should have gone to Congo where [the] majority of the populations are Catholics. We have seen Equity and KCB buying into Congo,” he says.

In August, KCB Group, the holding company of Kenya Commercial Bank (KCB), with assets worth $6.9bn at the end of 2021, acquired Trust Merchant Bank (TMB), whose assets were worth $1.1bn in 2020. As per the agreement, KCB owns an 85% stake in the bank.

Before KCB ventured into DRC, Equity Group Holdings, East Africa’s largest banking group was already there: Equity acquired an 86% stake in ProCredit between 2015 and 2017. In August 2020 Equity acquired a 66.53% stake in Banque Commerciale Du Congo (BCDC), DRC’s second-largest lender by assets.

Business Times Uganda

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