World Bank’s International Finance Corporation (IFC) will give Equity Bank a loan of KSh 5.4 billion to increase lending to small businesses. The institution revealed that Equity Bank will receive the senior loan with a renewable tenor of one year.
“The investment will help expand the Bank’s lending operations to the micro, small and medium enterprises (MSMEs) segment in Kenya, especially to companies whose cash flows have been disrupted by the outbreak of the Coronavirus pandemic,” reads an IFC disclosure approved on June 26, 2020.
IFC hopes that the loan will help promote the resilience and stability of trade finance markets. This will only happen if private sector players like MSMEs access finances necessary to support their operation during the pandemic, and therefore fuel economic recovery.
The loan will benefit small businesses with an employee base of between 10 and 300 and with total assets below Ksh 1.5 billion. The loan limits for micro-businesses is Ksh 1 million, Ksh 10 million for small businesses, and Ksh 100 million for enterprises.
Interventions to curb the Coronavirus spread have taken a toll on the country’s SMEs. An earlier survey by the Kenya Private Sector Alliance (KEPSA) revealed that close to 45% of SMEs and MSMEs had to close operations by May to limit the impact of the Coronavirus.
The pandemic has forced banks to restructure 23% of their loan books, making them less willing to lend to small businesses. Last month, Central Bank Governor Patrick Njoroge warned of the possible collapse of small businesses due to lack of credit line necessary to weather the pandemic.
Yesterday, the IFC announced the Ksh 5.4 billion facility meant to buffet businesses during the tough economic times of the pandemic. Equity Group CEO James Mwangi said that the loan is part of the bank’s businesses continuity management plan, which will help SMEs access financial support to recover and thrive through the crisis.
“I call on customers looking to seize emerging opportunities in the health and medical sector to manufacture personal protective equipment (PPE) or support the logistics of the entire ecosystems and value chain to take advantage of the $50 million facility”, Mwangi said.
This article was updated on June 23, 2020 to include Equity Group CEO’s quote and confirm the announcement of the facility.