Absa Bank Kenya Plc has signed a Sh1.25 billion Loan Portfolio Guarantee Facility with the African Guarantee Fund (AGF) , to increase credit accessibility for local small businesses, including start-ups.
Apart from providing credit to small and medium sized businesses, the partnership, through AGF’s capacity development assistance, will enable Absa Bank Kenya to assist SMEs sharpen their managerial capabilities in areas such as governance, human capital management, quality control, packaging, financial management, and marketing.
This will assist to scale up lending activities in situations where the target SME clients are unable to meet collateral threshold requirements.
Absa Bank Kenya Managing Director Jeremy Awori said the partnership will ensure that SMEs access funding thus reducing poverty, given that most business outfits in Africa are SMEs.
“Considering the financing gap experienced by most SMEs due to their risk profile and lack of security, the bank is always exploring innovative ways to mitigate possible risks in this segment and at the same time tap into the huge opportunity within this growth sector and driver of our economy,” Awori said.
To qualify for the loan, SMEs must have business that is geared towards investments and or working capital for growth.
Green and women in business enterprises will access up to 75% cover.
Other businesses which are not green- and women-related will receive up to 50% of cover.
African Guarantee Fund Group CEO Jules Ngankam said the organization’s objective is to enable SMEs to play their role of being the engine driving economic growth.
By closing the greatest obstacle, which is the financing gap, AGF enables SMEs to increase sustainable growth and to be a source of employment, skills, and wealth creation. In turn, this serves to reduce poverty throughout the continent.
“Beyond the overall SME scope, our partnership with Absa Bank Kenya will provide particular support to women entrepreneurs and SME businesses qualifying as green transactions. This is in line with our commitment to reducing the $42 billion gender financing gap facing women in Africa and on the other hand contribute to sustainable development through mitigation of the impacts of climate change,” said Ngankam
AGF through its Capacity Development program will support Absa Bank Kenya’s “Let’s Unite to See Her Empowered (SHE)” initiative which targets to reach out to 600 Women-led Enterprises within 12 months.
In the last few years, Absa Bank Kenya has taken a comprehensive approach to SME empowerment, in which business owners are trained on business sustainability, fundraising, bookkeeping, and networking to assure profitable operations through individualized propositions and products.
Absa Bank Kenya, through its Wezesha Biashara SME program launched five years ago, has disbursed close to KSh50 billion in loans to the sector.
“This is an indicator that as a bank, we are intentional about investing in the growth of the local SME sector which has become the key driver of economic growth, contributing up to 33% of GDP and employing more than 50% of the country’s workforce,” said Awori.