Chase Bank strikes SMEs financing deal with French firm

Chase Bank has signed a deal with the French Development Agency set to benefit small and mid-size enterprises (SMEs).

The €2 million (Sh230 million) risk-sharing agreement will result in the development agency guaranteeing loans to SMEs.

Under the deal, AFB will match every shilling that Chase Bank lends up to an SME.

“Business development and wealth creation is hampered by the lack of access to financing. This situation has prompted AFD to develop a risk-sharing tool to give this sector easier access to financing from financial institutions,” said AFD regional director Yves Terracol.

The shilling-for-shilling guarantee puts the total credit pool at Sh460 million.

Chase Bank has already signed a similar deal with AFD’s subsidiary Proparco for $40 million (Sh3.4 billion). The bank has been seeking loans from foreign-based lenders for onward lending to the SME market, its main area of focus.

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“As in the past, Chase Bank remains steadfast in transforming the SME sector. This is demonstrated in our focus to provide them with better and easier platforms in accessing credit,” said Chase Bank deputy CEO Paul Njaga.

Chase Bank is also betting big on mortgage loans and in February its subsidiary Rafiki Microfinance set aside Sh800 million for giving mortgage loans as low as Sh20,000 for home repairs and up to Sh5 million for first-time builders.

The microfinancier said it has loaned out a total of Sh2 billion since its formation two years ago.

Housing Finance, Equity Bank, DTB and KCB are other local banks that have gone to source funds from international lenders such as the International Finance Corporation for onward lending to their customers.

The local banks have preferred to seek borrowing from foreign lenders due to the ability to borrow long term funds at a lower cost.

Local deposits tend to be short term and are priced at higher rates which increases the cost of onward lending.