Absa Bank Kenya has announced the signing of a Ksh1.25 billion Loan Portfolio Guarantee Facility with the African Guarantee Fund (AGF) to help local small enterprises, including startups, gain access to financing. The guarantee line will be in effect for five years and will provide a single borrower maximum of Ksh. 100 million.
Absa Bank Kenya will be able to help small businesses improve their business managerial capabilities in areas such as governance, human capital management, quality control, packaging, financial management, and marketing through the partnership, which will be made possible by AGF’s capacity development assistance. When target SME consumers are unable to meet collateral threshold criteria, this will help to scale up SME lending activities.
Absa Bank Kenya Managing Director Jeremy Awori said the partnership will allow for direct contribution to solving one of the world’s toughest problems of reducing poverty and reducing inequality by ensuring financing access among the SMEs.
“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,” Mr. Awori said.
To be eligible for funding, targeted businesses must be new or incremental businesses that are solely focused on investments and/or working capital for growth, with green and women-owned businesses receiving up to 75% coverage. Other businesses that aren’t green or women-owned will receive up to 50% coverage.
The goal of the African Guarantee Fund Group, according to CEO Jules Ngankam, is to enable SMEs to play their role as the engine of economic growth. AGF enables SMEs to promote sustainable growth and be a source of job, skills, and wealth creation by removing the most significant barrier, which is the financing gap. As a result, poverty on the African continent is reduced.
“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,” said Mr. Ngankam.
In the last few years, Absa Bank Kenya has taken a comprehensive approach to SME empowerment, in which business owners are trained on business sustainability, fundraising, bookkeeping, and networking to assure profitable operations through individualized propositions and products.
The bank, through its Wezesha Biashara SME programme launched five years ago, has disbursed close to Ksh50 billion in loans to the sector.