Kenya: IFC gives KCB $150m to support manufacturing, real estate sectors

0
  • The International Finance Corporation (IFC) says it will extend USD 150.0 million (KSh 18.0 billion) to KCB Group as a senior unsecured loan 
  • The credit facility would support the growth of the bank’s climate finance portfolio, which entails clients in sectors such as manufacturing, real estate and agriculture
  • This is the third facility from IFC following a 10-year USD 150.0 million and a 7-year USD 75.0 million extended to KCB Group in 2020 and 2018, respectively
  • The funding makes KCB Group the biggest borrower from IFC among tier one Kenyan lenders, with a cumulative amount of USD 375.0 million (KSh 45.0 billion)

The International Finance Corporation (IFC) has disclosed that it would extend USD 150.0 million (KSh 18.0 billion) to KCB Group in the form of a senior unsecured loan with a maturity of 7 years and a grace period of 2 years.

The credit facility is aimed at supporting the growth of the bank’s climate finance portfolio, which entails clients in sectors such as manufacturing, real estate and agriculture.

Notably, this is the third facility from IFC following a 10-year USD 150.0 million and a 7-year USD 75.0 million extended to KCB Group in 2020 and 2018, respectively, to scale-up lending to Micro, Small and Medium Enterprises (MSME).

This makes KCB Group the biggest borrower from IFC among tier one Kenyan lenders, with a cumulative amount of USD 375.0 million (KSh 45.0 billion).

Upon disbursement, the credit facility is expected to provide the Group with a strong financial capacity to lend to MSMEs and support climate finance transactions.

As of H1’2022, KCB Group’s green lending as a percentage of its loan portfolio stood at 11.7 per cent, with the Group keen to align to global best practices and Environment Social and Corporate Governance standards.

KCB Teller. Photo: KCB.

Commenting on the development, Cytonn Investments analysts said they expect the Kenyan Banking sector to continue incorporating climate-related risk management as the Central Bank of Kenya (CBK) continues to enforce the Guidance on Climate-Related Risk Management rolled out in 2021.

“The guidelines are aimed at guiding financial institutions to integrate the risks and opportunities arising from climate change in their risk management, strategy and governance structure. As such, we expect the Kenyan financial institutions to channel their long term financing to companies and sectors whose activities do not pose an environmental risk.”

In a related story, Equity Group also received a US$165 million (KSh 18.6 billion) loan from the International Finance Corporation (IFC).

Equity said it would use the loan to help it increase working capital and trade-related lending to its small and medium-sized enterprise (SME) clients in Kenya, especially those facing COVID-19 related challenges.

The loan from IFC is one of the single-largest credit facilities to a Kenyan lender.

Besides shoring up the bank’s capital base, the new loan would also be lent to customers, fitting IFC’s’ impact investing criteria. IFC encourages the banks it funds to lend to women-owned enterprises and climate-related ventures such as renewable energy projects.

The facility would partly support Equity’s lending towards Climate Smart Projects and the local SME sector, which was hard hit by the Covid-19 containment measures.

The loan, which will ultimately support hundreds of Kenyan businesses in the manufacturing, health, trade, transport, and consumer goods sectors, as 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.

“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,” James Mwangi, Equity Group Managing Director and CEO, said.

Manuel Moses, IFC Country Manager for Kenya, said, “IFC’s longstanding partnership with Equity Bank underscores our commitment to Kenya’s financial sector and the broader 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.”

Wanjiku Njuguna is a Kenyan-based business reporter with experience of more than eight years.

Leave A Reply