Credit Bank is set to receive a Sh824 million loan from the African Development Bank (AfDB) for onward lending to small and medium-sized enterprises (SMEs).
The multilateral financier says the loans will be accessed by companies in the construction, agriculture, renewable energy and manufacturing sectors.
It is the first such financing programme for SMEs in the continent by AfDB. The loan, approved on Wednesday last week, has a five-year maturity with a two-year grace period but the interest rate was not disclosed.
“The board of directors of the African Development Bank Group … approved a $8 million (about Sh824 million) targeted financing to Kenya’s Credit Bank for lending exclusively to small and medium enterprises in construction, agriculture, renewable energy and manufacturing,” the financier said in a statement.
AfDB said the bank is well placed to lend to SMEs, which it has been providing with various credit facilities including loans, working capital and trade finance.
“As such, it is well-positioned to succeed in providing innovative longer-term financial solutions to SMEs along several value chains including strategical financial solutions in Kenya,” Stefan Nalletanby, AfDB director for financial sector development, said in a statement.
The multilateral lender notes that the loan is expected to help achieve socio-economic goals including enhancing entrepreneurship, job creation, income generation and sustainable growth.
This marks the latest investment by AfDB in Kenya.
The continental financier raised its funding approvals for Kenya projects by 37.7 percent last year to Sh48.2 billion, according to disclosures in the institution’s latest annual report.
The lender, in which Nairobi has a 1.44 percent stake, had committed a total of Sh35 billion for Kenya in 2017.
Credit Bank joins the list of local lenders that are increasingly taking substantial loans from global funds such as the IFC and European Investment Bank, attracted by relatively more favourable terms of the debt, including lower interest rate and longer maturity.
The lenders have complained of a mismatch between long-term loans and deposits that are mostly short-term in nature, exposing a gap that they have chosen to fill with credit from the institutions which charge single-digit interest rates.