Kenyan banks raise Ksh.100 billion to cushion SMEs from COVID effects

Kenyan banks raise Ksh.100 billion to cushion SMEs from COVID effects

  • Equity bank, KCB Bank, Cooperative and I&M bank’s lead the pack in funding the sector that has been ravaged by the effects of the pandemic.
  • In efforts to try and keep business afloat, local lenders have mobilised in excess of Ksh.100 billion to aid small business.

Kenyan banks have raised more than Ksh.100 billion for the SME sector to cushion them from the effects of the COVID-19 pandemic from last year to date.

Equity bank, KCB Bank, Cooperative and I&M bank’s lead the pack in funding the sector that has been ravaged by the effects of the pandemic.

In efforts to try and keep business afloat, local lenders have mobilised in excess of Ksh.100 billion to aid small business.

Equity Group, KCB Group, Cooperative and I&M Bank have by their own admission raised a combined Ksh.95.7 billionfor onward lending.

By March this year, Equity Bank announced plans to lend Ksh.75 billion to Small and Medium Enterprises at concessionary terms, at 13% interest for a period of five years.

This followed a mix of guarantees and cheap long-term loans amounting to Ksh.35 billion from several development finance institutions, including FMO, African Development Bank, Exim Bank of Egypt and Development Finance Institution (DFI).

Other funds included Ksh.5.4 billion loan facility with the International Finance Corporation a Ksh.10.9 billion with French financier Proparco a Ksh.16.5 billion loan facility with the European Investment Bank, a Ksh.10.9 billion from European development banks DEG, FMO and CDC-UK, and Ksh.8.25 billion from the African Guaranty Fund.

KCB Group on the other hand has mobilised an estimated Ksh.20 billion from various funds among them IFC, a member of the World Bank Group, The SANAD Fund for MSMEs, the Belgian Investment Company for Developing Countries (BIO), and Symbiotics.

I&M on the other hand in August this year received Ksh.5.35 billion from two development financiers for lending to small businesses. The funds, the International Finance Corporation (IFC) and the Dutch entrepreneurial development bank FMO said the lender should use to help smaller businesses across a range of sectors in Kenya to access financing for working capital, expansion, and to weather the effects of Covid-19.

While the funds mobilisation may translate to increased SME lending on paper’s, banks still hold the burden of proof as their support for SMEs remains under sharp focus. Credit growth to the private sector remains malnourished despite the end of interest rate caps but has been significantly drowned by the recent Covid-19 pandemic.

According to the latest available data from the Central bank of Kenya , private sector credit stood at 7.7% at the end of June.