Absa, African Guarantee Fund sign Sh1.25bn deal to unlock credit for SMEs

Absa Bank Kenya Plc (Absa Bank Kenya) has signed a Sh1.25 billion loan portfolio guarantee facility with the African Guarantee Fund (AGF) for Small and Medium-sized Enterprises. 

This will boost credit accessibility for local small businesses, including start-ups.

The guarantee, which will be in place for five years, avails up to Sh100 million for guarantee cover.

In addition to credit accessibility by local small businesses, the partnership, through AGF’s capacity development assistance, will enable Absa Bank Kenya to assist small businesses enhance their business managerial capabilities in areas such as governance, human capital management, quality control, packaging, financial management and marketing.

This will help scale up SME lending activities in situations where the target SME clients are unable to meet collateral threshold requirements.

Financing SMEs

 Speaking at the deal signing ceremony, Absa Bank Kenya Managing Director Jeremy Awori said the partnership will allow for direct contribution to reducing poverty and inequality by ensuring financing access among 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 qualify for funding, targeted businesses 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 per cent cover. Other businesses which are not green- and women related will receive up to 50 per cent of cover.

AGF Group CEO Jules Ngankam said the organisation seeks to enable SMEs to play their role of 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. In turn, this serves to reduce poverty in Africa.

“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

Business owners

He added that AGF, through its Capacity Development programme, will support Absa Bank Kenya’s “Let’s Unite to See Her Empowered (SHE)” initiative which targets to reach out to 600 Women-led Enterprises within 12 months.

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 individualised propositions and products.

 “Kenya is home to some of the most robust SMEs that play a critical role in the growth and development of the country’s economy for social prosperity. 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.

The bank, through its Wezesha Biashara SME programme launched five years ago, has disbursed close to Sh50 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 per cent of the country’s workforce,” Mr. Awori explained.