Inside Equity’s Sh500 billion plan to rebuild businesses 

Equity Group has said its recently announced Sh500bn “Marshall Plan” is expected to accelerate the economic recovery of the region, which has been ravaged by the pandemic.

“You notice that Covid-19 is like a world war. Economies have been devastated and systems and structures have been destroyed. It is necessary to rebuild for economies to start growing again,” Group Chief Executive Officer James Mwangi told the Sunday Nation.

Mr Mwangi said while developed countries are making investments of hundreds of billions of dollars to stimulate their economies after the Covid-19 shocks, African governments have largely been left behind.

When, for example, the pandemic hit Kenya in March 2020, the instinct was to shield businesses from the adverse impacts of the disease control measures. The tool of choice was relief for businesses, mostly on taxes, renegotiating loan repayments and a freeze on credit reference bureaus listings. 

While these may have saved many micro, small and medium enterprises (SMEs) from collapse, they were temporary and the road to recovery has become arduous, prompting private sector players to come up with post-pandemic recovery interventions.

In line with this, Equity has mobilised Sh500 billion, including funds from development partners, for lending to small businesses in the region to boost economic recovery. The new credit facility will be available to MSMEs in the five countries where the banking giant has a presence: Kenya, Democratic Republic of Congo, Uganda, Rwanda, Tanzania and South Sudan.

The bank is mobilising about Sh100 billion from development partners, including The Netherlands’ FMO Development Bank. Another Sh400 billion will be raised internally in order to initiate the Marshall Plan.

During this year’s Mashujaa Day celebrations, President Uhuru Kenyatta announced a stimulus package of about Sh25 billion, which is seen as a drop in the ocean given the devastation the pandemic has wrought on businesses, especially the SMEs.

Trade and investment agreement

It is against this realisation that Mr Mwangi says that despite having given customers repayment breaks of up to three years, they still felt the need to support them further to rebuild. 

“So we thought we could develop this Marshall Plan that will make available Sh0.5 trillion to businesses to be able to build back better and become resilient and help the economy achieve a self-propelling and self-sustaining capability,” Mr Mwangi said.

In all the five countries, the focus will be on agriculture, enterprise development and financial inclusion, energy, environment and climate change, social protection, and health. 

“We are leveraging EAC (East African community) protocols, Comesa (Common Market for Eastern and Southern Africa) agreements and the African Continental Free Trade Area. On DRC, we are leveraging the trade and investment agreement the two countries signed in April,” Mr Mwangi explained.

The bank projects that it will fund five million businesses over a period of five years, with each of these businesses expected to directly create five new jobs and another five indirectly. 

The facility will be made available to SMEs at current market lending rates, with Sh400 billion being accessed in the local currency and Sh100 billion in foreign currency to enable the SMEs borrow in the currency that matches their needs. 

“We are using the current lending rates in the market just to be as competitive as we can so that we can be complemented by the other banks,” said Mr Mwangi. 

The bank is also going to link businesses in different countries to trade with each other. For instance, plans are currently underway to take 200 Kenyan businesses to DRC where they will meet 1,000 Congolese business people.