IFC invests Sh12bn in DTB for SME funding
Diamond Trust Bank (DTB) finance director Alkarim Jiwa during the full year results announcement at the Nairobi Serena on March 28, 2022.
The International Finance Corporation(IFC) is set to invest Sh12.18billion($100million) in Diamond Trust Bank(DTB) to support businesses impacted by the Covid-19 pandemic.
The IFC disclosed that the investment will be in form of a senior debt under its Covid-19 emergency response working capital solutions scheme (WCS FIGE).
“IFC will invest up to $100 million in DTB, in the form of senior debt investment ”IFC said.
The WCS FIGE is designed to provide funding to existing IFC client banks in emerging markets that will in turn extend trade or working capital facilities to support the financing needs of companies in countries affected by the coronavirus pandemic to maintain trade flows, stabilise the economy, support employment, and restore supplies of key goods and services.
The IFC said the facility to DTB will target Small and Medium Enterprise(SME) borrowers.
Access to sufficient and affordable loans has remained a challenge for SMEs amid tight liquidity due to the aftershocks of the Covid-19 pandemic.
The Central Bank of Kenya last year reported that at least 35 percent of micro-enterprises were wiped out by the Covid-19 pandemic by July 2021, revealing the vulnerability of businesses forming over 90 percent of Kenya’s economy- the micro and small enterprises.
Several initiatives have recently been launched to support SMEs including a State-backed credit guarantee scheme through which more than Sh4billion has been disbursed by banks to support small businesses.
A recent release by the National Treasury said by August 2022, a total of 2,609 businesses small businesses had taken loans amounting to Sh4.12 billion since the scheme was launched about a year ago. The credit guarantee scheme encourages banks to disburse credit to borrowers they would otherwise turn away, confident that they will be compensated in case of defaults.
The beneficiary businesses include over 650 that employ less than 10 people each.
“60 percent of the CGS (credit guarantee scheme) beneficiaries were small enterprises while micro-enterprises were 25 percent and medium enterprises were 15 percent of the beneficiaries. 20 percent of credit facilities to marginalised groups- women, youth, PWDs,” Treasury stated.
Affordable credit
The fund was established to enhance access to quality and affordable credit for the growth and operations of MSMEs which would otherwise find it difficult to access loans from commercial banks.
A select group of commercial banks issue the loans and can be compensated for up to a quarter of losses from default using the cash provided by the Treasury, which now stands at Sh3 billion.
This means that the banks including Absa Bank Kenya, Diamond Trust Bank Kenya, KCB, and Co-op Bank can provide loans worth at least Sh12 billion or four times the amount provided by the government in the scheme.
