European Investment Bank, the long-term lending institution of the European Union, has extended about Sh10.57 billion (€95 million) to regional credit-starved SMEs through Equity Holdings Group and Housing Finance.
The Luxembourg-based lender yesterday signed two long-term new credit lines signed Equity and Housing Finance to support small projects in Kenya, Tanzania, DR Congo and Uganda.
The EIB signed a €75 million (about Sh8.33 billion) credit line with Equity Group, funds which will be disbursed through its subsidiaries in Tanzania, Uganda and DRC.
This is comprised of €36 million (Sh4 billion) will be availed through Equity Tanzania, €20 million (Sh2.22 billion) for Procredit DRC and €19 million (Sh2.11 billion ) through Equity Uganda.
This is in addition to €50 million (Sh5.59 billion) the East African Community's largest lender by deposit accounts with the EIB for onward lending through Equity Bank Kenya.
EIB vice president Pim van Ballekom said the funds are part of the EU bank’s commitment to support Kenyan lenders to provide credit to micro and small businesses.
“Kenya is increasingly becoming a hub for the region on many levels and we as a bank must look at this from a very basic point of view: there is a young and growing population with enormous potential. You need to support that momentum,” he said.
Equity Group managing director James Mwangi said the funds will be largely channeled to enterprises in import and export businesses, including manufacturers, to promote regional and international trade.
“With this facility (Sh13.89 billion ), we will be in a position to support 1,000 regional companies with an average loan of nearly Sh10 million each, thus assisting develop local entrepreneurs to compete at regional level furthering integration and cross border trade,” Mwangi said.
Under its East and Central Africa Private Enterprise Finance facility, IEB has also signed a long-term credit line deal with worth €20 million (Sh2.22 billion) to HF Group.
“This funding will be channeled towards financing the working capital and expansion of our growing SME customer base.” HFC managing director Sam Waweru said.
Equity and mortgage-leaning HF said they remain committed to ensure SMEs access loans in the wake of a credit squeeze to the private sector.
Central Bank of Kenya data have shown that in loans to the private sector slowed from about 19.7 per cent year-on-year in December 2015 to about 4.5 per cent in December 2016– the lowest since June 2008 when investments were yet to recover from post-election violence.
The SMEs, perceived as high-risky, have been the hardest hit.
Kenya Bankers Association said in January micro- and small-sized enterprises could be struggling to get loans from banks as a result of the rate caps,. following enforcement of the Banking (Amendment) Act, 2016 on September 14 last year.
“We have noted that the interest rates controls may have had an adverse impact on micro and small businesses in terms of loan approvals and disbursements," Nuru Mugambi, KBA director for marketing and communications, told the Star in an email.
EIB has provided €321 million (Sh35.68 billion) in credit line for Kenyan businesses in the last seven years. This has benefited nearly 800 local companies, creating an estimated 9,000 new jobs in agriculture, education, transport, tourism, trade among other sectors, officials said.