Small and medium-sized enterprises (SMEs) are becoming a favourite spot for lenders as each bank crafts a cash vault for this segment.
The latest commercial Bank to enter the fray is Co-operative Bank of Kenya which has secured a $ 75 Million long term credit from the International Finance Corporation(IFC) to support small businesses onward lending to micro, small and medium enterprises (MSMEs).
Co-operative Bank MSME loan facility
The seven-year Co-operative Bank facility will benefit MSMEs undertaking climate-smart projects including agricultural inputs and sustainable farming practices and those in renewable energy.
Co-op Bank, the country’s fourth-largest lender by assets ($5.1 billion), reported a net profit drop of 10 per cent for the nine months to September 30, 2020, citing reduced banking transactions and increased provisioning to cushion against the economic disruption occasioned by the Covid-19 pandemic.
Lenders’ move to seek fresh capital for small business enterprises follows an alert issued by Central Bank of Kenya (CBK) in May last year.
CBK had warned that about 75% of Kenya’s small and medium-sized businesses (SMEs) face collapse if they fail to get fresh funds from banks or equity partners.
The study conducted by CBK said SMEs lacked credit buffers and other resources to survive the slowdown caused by the COVID-19 disruptions.
The impact of social distancing, dusk-to-dawn curfew and closure of businesses like bars and restaurants has impacted on consumer spending, leading to job cuts and unpaid leave for workers as firms struggle to remain afloat.
National Treasury has also set its foot into the SME quagmire through setting up a KSh3 billion ($30 million) credit guarantee scheme for small businesses with a $111 Million commitment from the European Union(EU).
Small traders like barbershops, hair salons, hotels, restaurants and pubs, and hawkers, many of whom closed or scaled-down due to the pandemic, have been the worst hit.
KCB SME facility
In October last year, KCB secured $150 million from the IFC, to support the growth of the Bank’s sustainable climate finance portfolio and scale-up lending to MSMEs, including women-run business enterprises.
Absa Bank SMEs loans
Similarly, Absa Bank Kenya is boosting its lending initiatives. Small and Medium-sized Enterprises (SMEs) to help businesses recover from the adverse effects caused by COVID-19.
The Bank offers short term working capital financing “to bridge any cash flow challenges” that affect businesses’ capacity to restock.
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