Absa Bank Kenya has entered into a deal with African Guarantee Fund (AGF) to provide cover against defaults of up to Kes1.25 billion as the lender courts SMEs.
The guarantee line will run for a period of five years and avails cover of up to Kes100 million for a single SME borrower.
The partnership, through AGF’s capacity development assistance, will enable Absa Bank Kenya assist small businesses enhance their business managerial capabilities in areas such as governance, human capital management, quality control, packaging, financial management, and marketing.
The initiative will also assist to scale up SME lending in situations where the target SMEs are unable to meet the set collateral threshold requirements by the lender.
“Considering the financing gap experienced by most SMEs due to their risk profile and lack of security, the bank is always exploring innovative ways to mitigate possible risks in this segment and at the same time tap into the huge opportunity within this growth sector and driver of our economy,” Absa Bank Kenya Managing Director Jeremy Awori said.
To get Absa financing, participating SMEs must represent new or incremental business only geared towards investments and/or working capital for growth with green and women in business enterprises accessing up to 75 percent cover.
Other businesses which are not green- and women-related will receive up to 50 percent of the loan insurance.
“Beyond the overall SME scope, our partnership with Absa Bank Kenya will provide particular support to women entrepreneurs and SME businesses qualifying as green transactions. This is in line with our commitment to reduce the $42 billion gender financing gap facing women in Africa and on the other hand contribute to sustainable development through mitigation of the impacts of climate change,” AGF Group CEO Jules Ngankam said.
AGF seeks to enable SMEs to play their role of being the engine driving economic growth.
By closing the greatest obstacle, which is the financing gap, AGF enables SMEs to increase sustainable growth and to be a source of employment, skills, and wealth creation.
Absa has been championing SME empowerment, by among others coaching investors on business sustainability, fundraising, bookkeeping, and networking to assure profitable operations.
“We are therefore excited to be part of this partnership as we believe that empowering SMEs and start-ups not only positively impacts the growth of our economy but also improves the livelihoods of the communities where we operate,” Mr Awori added.
Launched five years ago, Absa Bank’s Wezesha Biashara SME programme has disbursed close to Kes50 billion in loans to the sector.
“This is an indicator that as a bank, we are intentional about investing in the growth of the local SME sector which has become the key driver of economic growth, contributing upto 33 percent of GDP and employing more than 50 percent of the country’s workforce,” said Mr Awori.