Capital Markets

Small businesses eye longer credit terms from banks

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Summary

  • Cooperative Bank last week announced a seven-year loan facility for small businesses with up to 250 workers.
  • The government has also entered the fray launching the Sh4 billion SME Guarantee fund backed by a promise by donors to fund Sh10 billion in capital.
  • The Africa Development Bank and European institutions have been key in supporting the affordable terms through low-cost funding.

Small businesses are eyeing longer-term loans at fairer rates from funds provided to banks by development finance institutions to provide capital to fund the post-Covid-19 recovery plan.

Cooperative Bank #ticker:COOP last week announced a seven-year loan facility for small businesses with up to 250 workers, partnering with the European Investment Bank (EIB) that has provided 50 million euros (Sh6.3 billion) to help small businesses fund the acquisition of tangible business assets, working capital, development of distribution networks innovation and business research.

EIB also agreed a nine-year, 100 million Euros (Sh12.7 billion) financing deal with pan African lender Ecobank Group last week for onward lending to sectors most impacted by the Covid-19 pandemic in the region.

“This latest cooperation will help companies to better tackle challenges triggered by the Covid-19 pandemic, unlock economic and social opportunities, especially for SMEs and women-owned and women-run enterprises, across Sub-Saharan Africa in the coming weeks,” said EIB vice president Ambroise Fayolle.

Equity Bank #ticker:EQTY has also announced a programme for lending to SMEs, offering medium term loans to businesses that have struggled to access credit due to risk concerns.

Equity Group chief executive James Mwangi, who has signed financing worth Sh62.8 billion said the capital will unlock potential to lend to SMEs at 13 percent for five years.

KCB #ticker:KCB also last year received $150 million (Sh16.4 billion) from IFC for MSME lending at flexible terms.

The government has also entered the fray launching the Sh4 billion SME Guarantee fund backed by a promise by donors to fund Sh10 billion in capital.

As of June, the Scheme had guaranteed 334 credit facilities amounting to Sh634.5 million.

The Africa Development Bank and European institutions have been key in supporting the affordable terms through low cost funding, guarantee schemes and financing SME training to ensure disbursed funds are well utilised.

Besides EIB other institutions include leading European development banks include German’s DEG, Dutch’s FMO, UK CDC and French’s Proparco as well as World Bank’s International Finance Cooperation.

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