Equity Bank gets KES 5b Loan from IFC to Support Local SMEs

World Bank Group’s private sector, the International Finance Corporation (IFC), has provided a $50 million (Ksh 5 billion) loan to Equity Bank Kenya.

The loan is to increase the bank’s working capital and trade-related lending to help small and medium-sized enterprise (SME) clients facing COVID-19 related challenges.

The loan is part of IFC’s global $8 billion fast-track COVID-19 facility, announced in March and designed to help businesses maintain operations and jobs during and after the COVID-19 crisis. This cements IFC’s place as the leading financer of local banks.

This makes Equity bank the first Kenyan bank to get a loan from IFC under its specific program to support lenders during the pandemic.

The credit is set to support hundreds of Kenyan businesses in the manufacturing, health, trade, transport, and consumer goods sectors that have been severely hit by the COVID-19 pandemic effects on the Kenyan economy.

“IFC’s loan, part of our business continuity management plan, will help Equity Bank extend much-needed support to our clients, particularly to SMEs in sectors hit hard by COVID-19. We have purposed to support and walk with them so that they can survive during this crisis, recover, and thrive after it,” Said Equity Group Chief Executive Officer James Mwangi in a statement on Wednesday,

“I call on customers looking to seize emerging opportunities in the health and medical sector to manufacture personal protective equipment (PPE) or support the logistics of the entire ecosystems and value chain to take advantage of the $50 million facility.” he added.

Equity Bank had borrowed a cumulative Sh17.4 billion from the global financier as of December 2019 and the upcoming credit line will raise the total to Sh22.7 billion.

IFC’s Country Manager for Kenya, Manuel Moses says “IFC’s longstanding partnership with Equity Bank underscores our commitment to Kenya’s financial sector and wider economy, especially during these difficult economic times. Keeping businesses solvent and protecting jobs are essential parts of IFC’s response to the unprecedented challenges of COVID-19.”

The COVID-19 pandemic has disrupted trade and value chains in Kenya, across Africa, and around the world, affecting commodity prices, reducing foreign financing flows, and collapsing tourism revenues.

Local banks have restructured 23.4 percent of their loan book totaling Sh679 billion due to the pandemic. In line with this, the banks are more cautious about extending new credit lines.

CBK warns that small and medium enterprises risk shutting down due to the coronavirus effects and are therefore in dire need of help to survive the economic slowdown.

IFC’s portfolio in Kenya stood at $884 million as of June 30, 2020, with investments supporting growth and jobs in the financial, manufacturing, agribusiness, services, infrastructure, and other sectors.

The firms seeking to benefit from Equity bank’s facility must have 10-300 employees and or annual sales between KES 10m – 1.5B.

The loanable amount per borrower has been set to be between KES 1m to KES 200m.