April 20, 2018—Kenya’s small and medium enterprises (SMEs) are to soon benefit from a $100 million line of credit managed by Kenya Commercial Bank (KCB) at a time when Patrick Njoroge, Governor of the Central Bank of Kenya, revealed that SMEs are being marginalized in the credit market.
The African Development Bank (AfDB) is providing the money intended as credit for liquidity support to businesses in various sectors, infrastructure, energy and manufacturing, particularly value-addition. KCB is Kenya’s biggest bank.
KCB Group Chief Executive Officer and Managing Director, Joshua Oigara said Thursday, “This strategic partnership between the two institutions reflects their continued commitment to finance projects in agriculture and food security, renewable energy, SMEs as well as youth segment.”
Early this week, Njoroge told a parliamentary committee that due to the higher risk associated with SMEs, Kenyan banks preferred lending to bigger firms. Njoroge said the 2016 law on interest rate caps had also worsened the situation for SMEs.
AfDB is looking at further support for specific population segments like the youth. This will effectively serve the dual purpose of enhancing job creation as well as facilitating financial access to businesses.
“The AfDB is cognizant of this important element and hence seeks to play a part by collaborating with partners with a view to leveraging respective comparative advantage,” Gabriel Negatu, the Director General of AfDB’s East Africa Regional Development and Business Delivery Office said.
According to Abidjan-based bank, the funding is expected to bolster growth of the Kenyan economy which is known for vibrancy, driven by its diverse and resilient characteristics.
Kenya’s economy enjoys a unique feature where both the corporate segment and the established SMEs drive economic growth and are also critical in the generation of employment, enhancing output diversification, developing indigenous entrepreneurship and forging trade ties not just in the region but globally.
AfDB thinks the availability of requisitely priced funds at matching tenors is therefore a key ingredient towards assisting these enterprises to thrive sustainability and eventually contribute towards economic development.