National Bank inks Sh1.1bn loan insurance for small businesses


A National Bank of Kenya branch in Nairobi. FILE PHOTO | NMG

National Bank of Kenya (NBK) has signed a Sh1.13 billion insurance deal with the African Guarantee Fund (AGF) against loan defaults associated with lending to small businesses.

The loan guarantee facility prioritises micro, small and medium enterprises (MSMEs) in the water, sanitation and hygiene sector, women-led business, and green investments by extending more loans to them for seven years.

The facility will cover up to 50 percent of collateral needs for businesses for loans of up to Sh100 million and 75 percent for women-led and green MSMEs.

The partnership is set to revamp lending activities to small businesses in situations where the targeted clients cannot meet collateral threshold requirements.

NBK acting managing director Peter Kioko noted that the guarantee facility will mitigate the accessibility challenge to affordable credit, which small enterprises face as they try to scale up.

“This strategic partnership will enable our MSMEs customers in the targeted sector, to overcome the financing barrier in their day-to-day financial management needs and therefore, unlock opportunities to spur growth,” said Mr Kioko.

AGF chief executive Jules Ngankam described the pact as a step towards the country’s realisation of UN Sustainable Development Goal number six of ensuring all access to water and sanitation.

“By expanding access to finance for SMEs in the WASH sector (Water, Sanitation & Hygiene), our guarantee will improve the lives and health of Kenyans through increased access to safe hygienic and sanitation facilities,” stated Mr Ngankam.

The deal with NBK is part of AGF’s $170 million (Sh19.3 billion) fund announced in 2019 for backing Kenyan banks’ lending to SMEs.

Some of the local lenders that have struck similar deals with the institution include Ecobank, SBM, Absa and Stanbic.

Lending to SMEs has traditionally been seen as presenting more risk of default compared to lending to large, established private firms and government-owned institutions. This has seen some banks opt to insure some or all of their SME loan portfolios.

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