Equity to lend IFC billions to SMEs, climate smart projects

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  • Equity Group has received a US$165 million (KSh 18.6 billion) loan from the International Finance Corporation (IFC)
  • The Kenyan bank said it would use the loan to help it increase working capital and trade-related lending to its SME clients in Kenya, especially those facing COVID-19 related challenges
  • The facility will partly support Equity’s lending towards Climate Smart Projects and the local SME sector, which was hard hit by the Covid-19 containment measures

Equity Group has received a US$165 million (KSh 18.6 billion) loan from the International Finance Corporation (IFC).

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

Support for women

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.”

According to the deal, IFC will directly provide US$50 million (KSh 5.6 billion), with the remaining US$115 million (KSh 13 billion) coming from partners.

IFC is also set to become the bank’s second-largest shareholder after signing an agreement to purchase insurance firm Britam’s stake in the lender. The institutional investor will buy 253.1 million shares of the bank from Britam at Sh55 each based on negotiations with the insurer.

IFC will acquire 164.5 million shares of the lender directly and another 88.5 million shares through its IFC Financial Institutions Growth Fund LP.

Equity Group has acquired a US$165 million (KSh 18.6 billion) loan from the International Finance Corporation (IFC) 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. Photo: Equity Bank.

Loan from Proparco 

In October 2021, The Exchange Africa reported that Proparco had granted Equity Group two guarantee facilities, ARIZ and EURIZ, totalling €39 million (5 billion KES) to help the Kenyan bank further support job-creating MSMEs.

This was part of the visit to Kenya of the French Minister’s Delegate for Foreign Trade and Economic Attractiveness, Franck Riester.

The French investment firm has also granted a €550,000 (KSh 70,000 million) technical help facility to support Equity Group Foundation’s health projects.

The EURIZ guarantee and the technical assistance grant benefited from support from the European Union and the Organization of African, Caribbean and Pacific States.

A breakdown of the funds

The first, a €19.5 million (2.5 billion KES) ARIZ guarantee, will cover 50% of the number of eligible loans allocated by Equity Bank to Kenyan MSMEs.

The second, a €19,5 million (2.5 billion KES) EURIZ guarantee, will cover up to 70% of loans granted to women entrepreneurs or MSMEs in sectors with high social or societal impacts such as Agriculture, Fisheries, Education and Health.

Over the past three years, Proparco and Equity Bank have become strong partners, thanks notably to a $22.8 million loan granted in 2019 and a $100 million loan granted in October 2020; both intended to support the bank’s commitment to Kenya’s MSMEs the actors in the real economy.

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

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