Banks Scramble for SMEs with Charming Deals


Micro, small and medium-sized (MSMEs) in Kenya are into a new era as financial institutions strategize to service this lucrative sector with all manner of appealing services. If anything the government initiative to set up a Shs 30 billion SME fund as part of a push to overcome the lending rates capping further proves how crucial the sector is to the development of Kenya’s economy.

The sector is critical for the sustainable growth and resilient development of African economies according to Felix Bikpo group chief executive at African Guarantee Fund (AGF). Peter Macharia the founder and managing director of SME lender Jijenge credit also share this belief saying: “SMEs is the engine room for growth of Kenya’s economy.”

Lucrative sector

Banks are increasingly viewing SMEs as lucrative but high risk as they represent possibly the largest single group of bankable clients disparate to say corporate businesses or other niches whose numbers are much less.

SMEs are also viewed as nimble and fast in decision making, improving their attractiveness. Like Macharia who runs a small business financier, he says he can make decision rapid and efficiently largely because he is the owner and there are much less bureaucracies involved. “For clients we can even negotiate for a better rate and disburse credit faster as opposed to say big lenders. That also gives us an upper hand.” This ultimately reduces the process cost for loans, both for the lender and the SME.

“Lenders have increasingly seen this sector as an opening for growth. International institutions are coming in making funds available for banks to lend. For instance our partnership with Alliance for a Green Revolution in Africa (AGRA) for a USD 500,000 grant to support small holder farmers under our supply chain financing explains this,” reveals Ivan Mbowa, CEO and co-founder of Umati Capital-an online SME lender.

AGF on its part reaffirmed its commitment of the growth of small businesses in Africa by announcing a Green Guarantee Facility in Nairobi June 2016 that will support SMEs in investing in green growth.

“In 2015, we acquired Guarantee Fund for Private Investment in West Africa (GARI Fund). This strengthened our capacity, accelerated our commercial presence across the continent and ensured that we are able to continue with our mandate of ensuring SME’s across Africa have access to the finances they need to grow,” said Bikpo at the launch adding that “We believe that SME’s are the tools by which African economies will continue to develop. It is estimated that the revenues generated by SMEs stands at USD 79 million. To date, AGF has disbursed USD 40 million as loans to SMEs in collaboration with our partner financial institutions.”

He also expressed his optimism to grow the capacity of SMEs across Africa in line with AGF strategic partnerships with more financial institutions.

Dedicated units

It is in view of this nearly all lenders locally have turned their attention to establishing departments to carter for SMEs. Family Bank, Equity Bank, KCB Group, Cooperative Bank of Kenya and Barclays Bank are among the lenders that have overhauled their support to SMEs to financial services, cash management and trade services.

banksFor instance KCB in March 2016 launched a five years Shs 50 billion youth entrepreneurship programme dubbed 2Jiajiri. It aims to nurture and support small businesses with a vision of creating at least 2.5 million jobs in the next five years.

“In our approach to serve SMEs better, we have tailored a wide range of products and services for the segment, specifically to address their needs,” said Annastacia Kimtai, KCB’s Group retail director adding that: “This range from business accounts, working capital loans, trade finance and supplier financing facilities among others. This is also informed by our conviction that today’s SMEs are Africa’s conglomerates of the future.”

KCB Group runs a dedicated SME unit and Biashara Club-a networking forum for entrepreneur that the bank services.

Mid this year Equatorial Commercial Bank (ECB) rebranded to Spire Bank with its eyes set on banking small and medium enterprises while expanding its retail base.

Last year Barclays Bank of Kenya stepped up its commitment to SMEs with a Shs 30 billion fund. Jeremy Awori, Barclays Managing Director said the bank would continue to support the sector: “It’s  part of our plan in helping accelerate economic growth and provide market specific products given that this sector contributes half of Kenya’s GDP and are now providing 80 per cent of new jobs.”