Banks are now keen to warm up to the Micro, Small and Medium-sized Enterprises (MSMEs) sector to drive growth and deepen financial inclusion in the wake of COVID-19 disruptions in large corporate loan disbursements.
Lenders see this as an opportunity to diversify their risk further and capture new customers that can eventually grow into big entities and are, therefore, borrowing from global financiers to grow their MSME loan portfolios.
This is done through putting requirements such as proper records and documentation that can help banks rely on historical trends to make risk forecasts.
Cooperative Bank, which in 2018, launched an MSME proposition has been enhancing the training of such entities across counties to equip them to succeed when they tap loans.
Over 139,000 MSMEs are on board to Co-op’s three packages — gold, silver and bronze — which are brands designed based on the entities’ business turnover.
The lender discloses that it had by September last year trained 14,665 MSME customers, held 181 non-financial services clinics, thirteen networking forums and three international business trips to support micro firms.
“We also support our customers in the MSME segment through sourcing for funds from our long-term funding partners that would ease their financing,” the lender said.
The lender’s borrowed funds hit Sh43.8 billion last September, being 67.6 per cent increase from Sh26.2 billion in September 2020.
The amount came from lenders such as IFC (Sh8.25 billion) with Co-op closing September with an MSME loan book of Sh15.32 billion or five per cent of the total loan book.
CBK data shows there were 915,115 active MSME loan accounts in the banking industry as of December 2020, with a total value of Sh638.3 billion.
Lending to MSMEs generated Sh70.8 billion for the banking industry in 2020, representing 12.2 per cent of the total income generated from lending by the banking industry.