Capital Markets

IFC signs deal to insure Bank of Africa SME loans

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Bank of Africa Kenya Managing Director Ronald Marambii. FILE PHOTO | NMG

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Summary

  • IFC has signed a deal to provide Bank of Africa Kenya with cover against losses on loans to SMEs as the lender looks to scale up its funding for small businesses.
  • The IFC, which is the private sector lending arm of the World Bank, said that the facility will cover 50 percent of losses on all eligible loans that Bank of Africa Kenya.

The International Finance Corporation (IFC) has signed a deal to provide Bank of Africa Kenya with cover against losses on loans to SMEs as the lender looks to scale up its funding for small businesses.

The IFC, which is the private sector lending arm of the World Bank, said that the facility will cover 50 percent of losses on all eligible loans that Bank of Africa Kenya (BOA Kenya)  extends to SMEs, up to the shilling equivalent of $5 million (Sh650 million).

The agreement will also see the IFC provide the tier-three bank with advisory services on how to mitigate risk as it shifts into the SME ending segment, which is deemed one of the riskiest in the banking sector.

"IFC's risk-mitigation product, combined with general and targeted advisory services support, will help BOA Kenya decrease risk and scale up its lending to SMEs in its most challenging markets. Also, it will help us transform into an SME-focused bank with branches across Kenya," said BOA Kenya managing director Ronald Marambii.

The loans under guarantee will largely target women-led businesses and those focused on addressing climate change.

BOA Kenya, which by the end of 2020 held a market share of 0.72 percent in the Kenyan banking industry, held a loan book of Sh15 billion as at September 2021, having shrunk from Sh17.23 billion a year earlier.

It reported a profit after tax of Sh4.58 million in the nine months to September 2021, reversing a loss of Sh217.9 million reported in the corresponding period in 2020.

The IFC programme is supported by the Global SME Finance Facility (GSMEF), which is a partnership between IFC and the UK’s Foreign, Commonwealth and Development Office and the Netherlands Ministry of Foreign Affairs.

Also lending support is the Women Entrepreneurs Opportunity Facility (WEOF), a global finance facility dedicated to expanding access to capital for women entrepreneurs, was launched in 2014 by IFC through its Banking on Women program, and Goldman Sachs 10,000 Women.