Family Bank gets Sh4bn AfDB loan for SME support

Family Bank

Family Bank Towers in Nairobi.

Photo credit: Dennis Onsongo | Nation Media Group

Family Bank Limited(FBL) is set to get a Sh3.95 billion ($ 30 million) loan from the African Development Bank(AfDB) for onward lending to small and medium-sized firms (SMEs).

The Board of Directors of the AfDB approved the facility which will provide a trade finance line credit to FBL and boost intra-Africa trade and promote regional integration.

“The facility will provide a trade finance line of credit to support FBL’s short-term trade finance activities, a transaction guarantee, which will provide a risk-covered strategic platform to enable confirmation of trade transactions originating from FBL, as well as a targeted line of credit through the Bank’s Africa SME programme” AfDB said.

“The facility is expected to boost intra-Africa trade, promote regional integration, and contribute to the reduction of the trade and SME finance gap in Kenya, by mobilising significant financial resources for SMEs and local enterprises. This will enhance and deepen value chains, and diversify productive capacity, ultimately stimulating growth in Kenya” it added.

The Bank will provide up to Sh1.31billion ($10 million) to support FBL’s short-term trade finance activities of SMEs and local corporates, an up to Sh1.31billion transaction guarantee facility to support the confirmation of trade finance transactions of FBL, and up to Sh1.31billion million targeted line of credit to support medium-term financing for SMEs in the health, renewable energy, and agriculture sectors. The facilities will also support women-owned businesses.

FBL will use the short-term trade facility to complement the line of credit and provide shorter-term trade loans along the value chains of SMEs and local corporate businesses.

“In addition, the transaction guarantee facility will allow the Bank to provide up to 100 percent guarantee to Confirming Banks for the non-payment risk arising from the confirmation of letters of credit and similar trade finance instruments issued by FBL,” AfDB said.

Speaking soon after the Board approval, the Bank’s Acting Director for Financial Sector Development, Ahmed Rashad Attout stated: “We are excited about finalizing this facility with FBL as a partner and which will aid FBL in scaling up its trade and SME finance offerings in Kenya to help meet the ever-increasing trade and SME finance gap. It will allow FBL to play a significant role in providing funding as is necessary for the post-Covid -19 economic recovery of Kenya”

The Bank’s Director General for East Africa, Nnenna Nwabufo said: “The advent of Covid -19 coupled with stringent regulatory/capital requirements and know-your-customer compliance enforcement, has seen many global banks reduce their correspondent banking relationships in Africa, while some are exiting the market altogether”