Small firms are set to enjoy improved access to credit following a $90 million (Sh9.29 billion) financing deal reached between the African Development Bank (AfDB) and Commercial Bank of Africa.
Under the deal signed in Nairobi yesterday, Sh5.16 billion will be available for onward lending to businesses seeking loans while Sh4.13 billion will be set aside as credit for importers and exporters.
Small and micro-enterprises (SMEs) have cited poor access to credit and regulatory burdens among top challenges that curtail their growth.
“While SMEs provide employment to more than 80 per cent of the population in Kenya and account for a majority of new jobs created every year, it is unfortunate that the financial sector has to a large extent not been able to meet their financing gap for growth,” Commercial Bank of Africa managing director Isaac Awuondo said at the signing ceremony held at AfDB offices in Nairobi.
The institutions said the funds will provide financing for SMEs and local corporates involved in value-addition in the trading, manufacturing, agriculture, infrastructure, transport, and construction sectors, among other sectors.
AfDB director general for East Africa Gabriel Negatu said the line of credit will boost efforts to reduce financing constraints faced by SMEs and local corporates.
Credit to the private sector has been on a decline since August 2015 even as rates of default rose following the coming into effect of the rate capping law last September.
The downward trend however reversed last month with a slight increase of 1.6 per cent from 1.4 per cent in July.