Fund to spend Sh6.7bn to aid SMEs

By: IMMACULATE KARAMBU

The African Guarantee Fund will spend Sh6.7 billion to aid small and medium enterprises (SMEs) in Kenya access credit next year.

The fund, which is partly financed by the African Development Bank (AfDB), provides guarantees to SMEs in Africa to help them access loans from financial institutions to expand their operations.

In total, the fund will issue Sh33.7 billion ($330 million) in form of guarantees to SMEs across Africa in 2016, marking a 65 per cent growth from Sh20.4 billion ($200 million) it has spent this year.

“African SMEs need better guarantees that can facilitate their access to finance and help them grow faster. SMEs represent 90 per cent of privately-owned African firms and contribute 33 per cent of the continent’s gross domestic product,’ said Felix Bikpo, chief executive officer of the African Guarantee Fund.

He was speaking on the sidelines of the Africa SME Champions Forum that ended on Wednesday.

Apart from AfDB, African Guarantee Fund is also financed by the governments of Denmark, Spain, France and Japan.

SMEs obtain guarantees from the fund at an interest rate of 1.7 per cent. The fund is targeting to increase the number of beneficiaries from the current 1,000 to 5,000 next year.

RENEWED FOCUS

The lack of standardised and shared information registry for SMEs has been a hindrance to accessing credit, leaving the businesses cash strapped and unable to expand.

Recently, there has been a renewed focus on SMEs with major banks focusing on the sector to grow their loans portfolio.

In August, Barclays Bank announced a Sh30 billion credit line targeting SMEs just a month after Chase Bank and Kenya Commercial Bank (KCB) unveiled Sh60 billion and Sh1 billion financing plans to SMEs after the Global Entrepreneurship Summit (GES).

Equity Bank has signed loans amounting to Sh53.5 billion for onward lending to SMEs, raised from the US Overseas Private Investment Corporation, AfDB, the International Finance Corporation (IFC) and the European Investment Bank.

SOURCE: DAILY NATION