AfDB Signs A Deal With CBA To Support SMEs

Small and Medium Enterprises in Kenya have received a major financial boost after the African Development Bank and the Commercial Bank of Africa signed a combined financial support package. The two financial institutions signed a financial package worth 90 million US Dollars that will be channelled to supporting SMEs as well as local corporates in the infrastructure, tradable and other transformative sector transactions in Kenya.

The 90 million US Dollars is split into two phases; 50 million dollars Line of Credit and 40 million dollars Trade Finance Line of Credit. The amount, according to both AfDB and CBA, will provide liquidity support to expand financing to small and medium enterprises and local corporates involved in value-addition in the trading, manufacturing, agriculture, transport, and construction.

The partnership will help shield the SME sector in Kenya which has been going through tough economic times.  According to statistics collected in 2016, more than 400,000 SMEs in Kenya die annually with close to 95 percent of them facing their demise before their second birthday. Breaking the numbers further reveal that more than 30,000 SMEs are dying monthly with more than 1000 collapsing daily.

 

CBA’s Group Managing Director, Isaac Awuondo and AfDB’s Director-General for East Africa, Gabriel Negatu exchange documents, following the signing of the $90 million financial package. CBA’s Group Executive Director Martin Mugambi, (left) witnessed the signing. Picture – Courtesy

“While SME’s provide employment to more than 80 percent of the population in Kenya, and account for a majority of new jobs created every year, it is unfortunate that the financial sector in Kenya has to a large extent been able to meet their financing gap for growth. The bold step that we have taken through our willingness to work with SME’s illustrates the potential we see in SME’s and their role in sustaining Kenya’s economic growth,” said Mr. Isaac Awoundo, Group Managing Director at CBA.

Early this year, Commercial Bank of Africa became the first institution in the country to develop a product that was aimed at taking care of the millennials. The product is called Loop, with the main call of unbanking oneself, was meant to enhance the bank’s understanding of the new generation, their spending behaviour, what they need from a financial institution, thus, helping them up the financial ladder. AfDB, on the other hand, had laid down a 10-year strategy covering the period between 2013 to 2022 which comprised of 5 strategic priorities which include Industrialize Africa, Integrate Africa, Feed Africa and Improve the quality of life for the people of Africa.

To help reach its developmental plan for Africa, AfDB was inclined to focus more on the SME sector which is the developmental backbone of most African economies. Kenya’s gross domestic product (GDP) for 2017, for instance, was projected at 6.4 percent. The projection, though based on numerous assumptions, it based majorly on the performance of micro and small medium enterprises. In Kenya, more than 80 percent of businesses are SME and in 2014, 80 percent of the 800,000 jobs that were created that year were from the informal sector which is dominated by SMEs. With an employment rate standing at 39.1 percent, the highest in the East African region, SMEs play a key role in both the economic development and job creation.

“We are proud to partner with the CBA Group, a well-established bank in the region, and the largest bank in Kenya, by customer numbers. Like CBA we believe that Africa’s economic growth cannot reach its optimum if we do not support the SME’s, who play an integral part in ensuring that goods and services reach a majority of the population,” said Mr. Gabriel Negatu, AfDB’s Director-General for East Africa.

 

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