Absa Bank Kenya has inked a deal with the African Guarantee Fund (AGF) to provide cover against defaults of up to Sh1.25 billion as the to expand loans to small businesses including start-ups.
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.
The guarantee line will be in place for a period of five years and will see the bank provide loans of up to Sh100 million to a single borrower.
“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,” Absa’s managing director Jeremy Awori said.
The partnership will also provide small businesses with technical assistance to build their managerial capabilities in areas such as governance, human capital management, quality control, packaging, financial management and marketing.
This will assist to scale up SME lending activities in situations where the target clients are unable to meet collateral threshold requirements, the parties said in a statement.
To qualify for funding, prospective borrowers 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 cover.
The deal with Absa is part of AGF’s $170 million (Sh19.3 billion) fund announced in 2019 for backing Kenyan banks’ lending to small and medium enterprises (SMEs).
