European funding boost for Kenyan small businesses (01/02/2012)

Kenyan companies will benefit from improved funding essential for growth and investment following a EUR 20 million finance agreement between the European Investment Bank, the long-term lending institution of the European Union, and two Kenyan banks, ABC Bank and Consolidated Bank, with proven experience in understanding business needs.

The European Investment Bank’s Private Enterprise Finance Facility II will assist African Banking Corporation and Consolidated Bank of Kenya to provide long-term funding in Kenyan Shillings, US dollars and Euros to assist lending to local businesses seeking to expand or invest in new activities. This is similar to a previous scheme in Uganda that created 1,700 new jobs across the tourism, manufacturing, agribusiness, construction and education sectors.

“Ensuring long-term funding is available for small companies in Kenya will promote sustainable economic growth and job creation in Kenya. The European Investment Bank looks forward to working closely with local Kenyan banks to help entrepreneurs to expand their business activities across the country.” said European Investment Bank Vice President Plutarchos Sakellaris.

“We are excited about this partnership with EIB and view it as a valuable endorsement of the good working relationship we, at ABC Bank, have with our customers. This facility is also in line with our vision of facilitating our customers, especially in the SME sector, to grow their businesses because we will be able to lend to them for a longer tenor and at very competitive pricing.  Also, our Importing and Exporting customers will get the additional benefit from this facility through the multi currency long-term lending opportunities that will safeguard against currency fluctuations and allow business expansion.” said Mr. Shamaz Savani, ABC Bank, Managing Director.

Speaking at the event, Consolidated Bank’s Chairman Eunice Kagane said that the facility will enable the Bank to play an active role in the much needed financial inclusion for small and medium businesses in Kenya’s economy. “SMEs will continue to play a significant role in the growth of our economy. We have begun to see the positive impact of local companies through delivery of innovative products and services in the market, as well as provision of employment. However, we appreciate that banks like ourselves have a crucial role to play to enable enterprises to optimize their contribution to the economy. ” said Ms Kagane.

Consolidated Bank’s CEO, David Wachira said that the funds will be available to the Bank’s existing as well as new customers. “The facility which will be available at reduced interest rates comes at a time when lending rates in the market have risen significantly. Therefore we expect to fund businesses which otherwise may have faced challenges with access to funds.” Wachira said. According to Mr. Wachira, the signing of this agreement is one of several initiatives by the Bank to reach out to growing businesses countrywide. The Bank is investing in technology to enhance service to business customers through mobile and internet banking. Additionally, the Bank will roll out its agency banking services in the second quarter of the year. These moves are aimed at deepening and widening its reach of financial services to more customers to enable them transact their business faster and easier.

The Private Enterprise Finance Facility II programme will provide new finance for Kenyan companies seeking long-term loans and will reduce the risk of interest rate fluctuations. Providing funding in Euros and US Dollars to export-oriented enterprises, alongside Kenyan Shillings for firms targeting local sector demand and generating revenues in Shillings, will help local firms to grow. The tenor of the facility ranges between four and ten years and will match the economic lifetime of planned activities. Small companies, a crucial segment essential for growth in Kenya, will be able to make use of three-year loans.
 
The European Investment Bank funding will be supported by a technical assistance programme for capacity building of the final beneficiaries of the facility. Companies seeking loans or existing SME clients of the bank will be able to receive training in workshops and individual coaching to improve their management skills and enable them to prepare bankable loan applications and business plans. This will increase the potential number of qualifying projects that could be financed by the Private Enterprise Finance Facility II programme and reduce the credit risk of the financial intermediaries.

Kenyan small businesses have benefited from more than EUR155m of European Investment Bank funding since 1991 this has played a crucial role in promoting long-term lending to private sector companies in the country. Last year the European Investment Bank provided more than EUR 1.3 billion for projects across Africa.

Notes for Editors:

The European Investment Bank (EIB) is the long-term lending institution of the European Union owned by its Member States. It makes long-term finance available for sound investment in order to contribute towards EU policy goals. The EIB has been a development partner in many African, Caribbean and Pacific (ACP) countries since 1963 through a series of lending mandates from the European Council. EIB loans in the ACP regions support the alleviation of poverty and the development of sustainable economic growth. The Bank lends from two sources - own resources and the Investment Facility, a revolving fund financed by the EU Member States through the European Development Fund.

ABC Bank, which started operating in 1984, has a countrywide network of branches in Kenya; 4 in Nairobi and a branch each in Mombasa, Kisumu, Eldoret, Meru and Nakuru. Its operation in Uganda, ABC Capital Bank Limited, has two branches in Kampala. The bank has carved a special niche in providing focused services and solutions for SMEs and corporates, facilitating its business customers through innovative business solutions and emphasizing its main strengths in structured trade finance and international/local remittance solutions, loans, overdrafts and asset finance solutions.

Consolidated Bank has been in the Kenyan market for 22 years and has 17 branches located in most major cities and towns countrywide.  With a special focus on SMEs, the bank is in a strong position to help growing businesses unlock their potential and deal with the complexities they face in business. Consolidated bank upholds an independent, dynamic and results oriented culture. The Bank has adopted a flexible and innovative approach to offering financial solutions. Its state of the art ICT software allows for real-time banking across a variety of platforms and channels, allowing its customers to enjoy convenient access to service as and when they require it. Its distinctive personalised relationship approach enables the Bank to be responsive to the unique business needs of customers.

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