European lender to announce Sh27bn funding for small businesses
The EIB gave Sh10.5 billion financial support to regional private sector investments in Africa in 2016. PHOTO | FILE
The European Investment Bank (EIB) is Monday expected to announce at least Sh27 billion of new lending to East Africa’s small and medium sized companies this year.
EIB Regional Representation to East Africa Catherine Collin and head of SME lending outside Europe Robert Schofield are expected to give details of the new lending to be channelled through East African banks.
The EIB gave Sh10.5 billion financial support to regional private sector investments in Africa in 2016.
Kenyan entrepreneurs will access the EIB-backed loans directly from local banks.
The Luxembourg-based lender says the fund is likely to give priority support to agricultural investments in Kenya in a bid to promote food security and create jobs.
“The EIB confirmed that close cooperation with banks across the region, business associations, regulators and government departments has been crucial to ensure the maximum impact and benefit to the real economy of these credit lines and that experience gained in East Africa since 2010 has been key to strengthening the EIB’s support for private entrepreneurs elsewhere on the continent,” the bank wrote in a statement.
The EIB is the world’s largest international public bank.
The long-term lending institution has supported investment across Africa for more than 50 years giving more than 22 billion euros across the continent.
The International Finance Corporation (IFC), the World Bank’s private sector lending arm, estimates that SMEs in Kenya have an annual credit gap of over $6 billion (Sh630 billion), which affects their ability to compete with bigger businesses.
In Kenya, where the EIB has operated since 1976, several lending institutions have partnered with it to support SMEs. In December 2015 Family Bank secured Sh3.33 billion from EIB to lend to SMEs in form of cheap, long-term loans.
Family Bank had also received Sh2 billion three years earlier from the lender.
Foreign financiers have since given the SMEs focus in providing lending facilities through banks as the sector’s relevance as key engine for economic growth begin to show.
In November 2015 the troubled Chase Bank signed a Sh1.12 billion deal with French development agency, Agence Française de Dévelopment (AFD), to strengthen its lending towards companies investing in clean energy projects.
In the same year, African Development Bank gave Sh15 billion to Equity Bank and Sh5 billion loan to Chase Bank to boost their SMEs lending capacity.
Local lenders have also turned to offering SME-specific products like invoice financing for businesses with payment cycles that require liquidity.
SME financier, Umati Capital, for example offers daily payments to dairy farmers on behalf of the processor without collateral, while the processor gets an extended period of up to 60 days to repay the money.
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