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I&M, Dutch lender ink deal to insure Sh1.7bn SME loans


Signage of an I&M Bank branch on Kenyatta Avenue, Nairobi. FILE PHOTO | FRANCIS NDERITU | NMG

I&M Bank Kenya has signed an agreement with the Dutch development bank, FMO to insure the lender against loan defaults of up to Sh1.7 billion ($15 million) extended to small and medium enterprises.

Through the Nasira guarantee portfolio, the bank will issue credit to youth, women-led and migrant entrepreneurs that were affected by the pandemic, to enable their sustainability and create jobs.

The risk-sharing facility is expected to help the subsidiary of I&M Group scale up its lending activities beyond corporate clients to the micro, small and medium enterprises (MSMEs) sector that is deemed too risky to lend to those unable to meet collateral threshold requirements.

“I&M Bank anchors its business model on empowering prosperity for all its stakeholders. We strongly believe that the guarantee from FMO will help our (M)SME clients accelerate their business growth and support their expansion efforts while providing support to those clients negatively impacted by Covid-19,” said I&M Bank Kenya CEO Kihara Maina.

The Nasira programme is enabled by the European Union through the European Fund for Sustainable Development and MASSIF, the financial inclusion fund that FMO manages on behalf of the Dutch government.

Nasira guarantees partly the value of the loan to a borrower by offering to share future credit losses in case of a default, allowing local banks to provide loans to individuals and businesses termed risky to lend to by commercial banks.

The fund will help I&M bank primarily focus on corporate clients, increase access to finance to SMEs and provide digital solutions such as FinTech partnerships for a smooth transition.

“This latest guarantee is perfectly aligned with our strategy, and contributes to SDGs 8 and 10 for Decent Work and Economic Growth, as well as reduced inequalities,” said Huib-Jan de Ruijter, FMO chief investment officer.

“We look forward to extending our mandate through Nasira with the opening of the EFSD Plus (EFSD+) this year, significantly increasing our contribution to inclusive growth, job creation, and sustainable development across a wider range of geographies and sectors.”

Since the capping of loan interest rates introduced in September 2016, the banking sector had shunned lending to SMEs that they termed as high-risk businesses for fear of high loan defaults.

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