Kenya Commercial Bank(KCB) has signed a deal with Swedish International Development Cooperation Agency(SIDA) worth KSh 1 billion to set up a guarantee fund for Small and Medium-sized Enterprises(SMEs). The 7-year credit guarantee facility will enable KCB to finance SMEs that are currently experiencing challenges including access to affordable credit facilities.
According to Michael Kung’u KCB Acting Head of Retail Banking, this credit facility will enable SMEs to access its expanded financing options and reduce the need for collateral.
The risk-sharing facility provided by SIDA will allow KCB to widen its lending options while allowing the lender to build the capacity and track records needed to serve the niche SME segment.
“SIDA aims to create opportunities for SMEs and will enable Sweden to go beyond its official development assistance and focus on more innovative financing approaches to provide private capital to SMEs,” said Caroline Vicini, Swedish Ambassador to Kenya.
The Bank aims to offer practical and attractive options to SMEs to access the capital that they require to fund and grow their operations.
Over the last year, commercial banks in Kenya have been falling over each other to support SMEs through a state-sponsored program aimed at this niche market that is still underserved by lenders.
Since 8th December 2020, Kenya’s National Treasury & Planning Ministry has been implementing a Credit Guarantee Scheme (CGS) to support Micro, Small and Medium Enterprises (MSMEs) in securing credit from formal lending institutions.
Anchored on the Public Finance Management (Amendment) (N0. 2) Act of 2020 and the Credit Guarantee Scheme Regulations, 2020, the Scheme’s objective is to enhance access to quality and affordable credit for growth and operations by MSMEs, who would otherwise be unable to raise the required collateral for such loans, and also face an uncertain and risky business environment.
So far, seven commercial banks are taking part in this Scheme. They include ABSA Bank Plc, Credit Bank Plc, Diamond Trust Bank Kenya Ltd, KCB Bank, NCBA Bank Plc, Stanbic Bank Kenya Ltd., and the Cooperative Bank of Kenya Ltd.
The Government has been working closely with the Banks to deepen the impact of the Scheme, through continuous performance-monitoring and capacity-building where necessary. It continues to work closely with banks, the private sector, and development partners to improve the design, resource mobilization, and overall long-term sustainability of the Scheme.
This will ensure that it keeps pace with international best practices and principles governing the management of prudent public credit guarantee schemes.
The state’s Credit Guarantee Scheme is an innovative instrument aimed at supporting the private sector in accessing credit. Qualifying MSMEs are being advised to approach participating banks and access these facilities.
ALSO READ: State to Increase SMEs Credit Scheme to KSh10 Billion
