Banks Signs Partnership Deal To Cover Loan Defaults By SMEs

The African Guarantee Fund (AGF) and the National Bank of Kenya (NBK) have agreed to an insurance deal worth Ksh1.13 billion to shield them from loan defaults associated with lending to small enterprises.

The loan guarantee facility gives priority to women-owned businesses, green initiatives, and micro, small, and medium enterprises (MSMEs) in the water, sanitation, and hygiene sector. For loans of up to Ksh 100 million, the facility will cover up to 50% of the required collateral; for women-led and environmentally sustainable MSMEs, this percentage rises to 75%.

The partnership seeks to overhaul lending to small firms when the intended clients are unable to provide the required amount of collateral. Acting managing director of the National Bank of Kenya Peter Kioko highlighted that the guarantee facility will lessen the difficulty small businesses have accessing inexpensive loans as they attempt to expand.

“This strategic partnership will enable our MSMEs customers in the targeted sector, to overcome the financing barrier in their day-to-day financial management needs and therefore, unlock opportunities to spur growth,” said Mr Kioko.

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