Equity inks Sh53bn loan deal for SMEs at Obama summit

Local entrepreneurs look set to benefit from a Sh53.1 billion Equity Bank loan after multilateral lenders committed to offer the local lender the cash at the just concluded Global Entrepreneurship Summit (GES).

Equity managing director James Mwangi said the decision was informed by the bank’s aggressive focus on small and medium-sized enterprises (SMEs), a model that has made it the largest lender by customer numbers.

“Our ultimate objective is to break the poverty cycle by funding entrepreneurial ideas and opportunities that accelerate job and wealth creation for our youth and women,” Mr Mwangi said during signing for the funding on Sunday.

US-based Overseas Private Investment Corporation (OPIC)ommitted Sh20.2 billion ($200 million), the African Development Bank (Sh15.1 billion or $150 million) while International Finance Corporation (IFC)ommitted Sh10.1 billion ($100 million).

The European Investment Bank has set aside Sh7.5 billion ($75 million) to finance Kenyan businesses bringing the contributions to $525 million (Sh53.1 billion).

These multilateral lenders offer Equity Bank loans at concessional rates, giving room for the Nairobi bourse listed bank to offer the loans to entrepreneurs at below market rates.

For instance, interest on a previous IFC loan to Equity stood at 0.47 per cent plus a 2.75 per cent margin and tax.

The current average interest on commercial bank loans stands at 15.1 per cent and is expected to increase after the Central Bank of Kenya increased the benchmark lending rate by 1.5 percentage points to 11.5 per cent on July 8.

Equity Bank, which is set to leverage on the lending to grow its revenues, has 10 million customers with SMEs accounting for more than half of its loan book.

The top-tier lender posted a 10.7 per cent growth in net profit to Sh4.2 billion in the first quarter of this year on increased lending.

The Sh53.1 billion will be lent to entrepreneurs including youth and women enterprises, firms pursuing green energy solutions, agroprocessing, retail and manufacturing.

The GES attracted thousands of global investors scouting for deals in East Africa’s largest economy.

READ: Billions pledged to support start-ups, SMEs during Obama summit

The Kenya Investment Authority said on Tuesday that they were still compiling a list of global firms that plan to enter the local market.

The GES, launched by President Barack Obama of the United States provided a platform for hundreds of start-ups to pitch their ideas to venture capitalists and angel investors.

Equity has presence in Kenya, Rwanda, Uganda, South Sudan and Tanzania.

The firm said it will expand training for entrepreneurs in financial literacy following similar successful programmes in the past where 1.3 million women and young people have benefited.

“With the level of funding that we have managed to attract, we are humbled that global development partners recognise Equity Group Holdings mission and we very excited that we shall manage to keep the GES fire and spirit up,” said Mr Mwangi.