Equity Group and FMO sign US$50m loan guaranty facility to support entrepreneurs

KENYA – Equity Bank has entered into a partnership with the Netherlands development bank FMO with the signing of a NASIRA loan portfolio guarantee facility to support Kenyan entrepreneurs.

The US$50 million facility is the second NASIRA guarantee signed with Equity with the support of European Union funding.

With the funding, Equity Bank Kenya will further support Kenyan entrepreneurs during these challenging times with a special focus on micro, small and medium enterprises (MSMEs), it said in a press statement.

The FMO funding will provide a NASIRA loan portfolio guarantee covering loans provided to MSMEs affected by the Covid-19 pandemic, including women and young entrepreneurs and companies in the agri-value chain.

The guarantee mitigates Equity’s risk in the MSME segment which has heavily borne the brunt of the pandemic.

“Equity is committed to continue supporting businesses to survive, recover and thrive post CovidD-19 pandemic so as to protect lives and livelihoods, “Equity Group MD and CEO James Mwangi said.

He noted that MSMEs are key players in driving the growth of the economy and with the support, in form of guarantee from its partners, FMO, will mitigate the risk Equity is exposed to as it continue to work with MSMEs navigate through current uncertainty.

He said some MSMEs require more funding as they re-purpose their businesses while others require accommodation in loan repayments.

“This facility among others that Equity has signed will assist us to support MSMEs and keep the lights of the economy on as we look forward to the economy bouncing back with the development and rollout of the vaccine, ”Mwangi said.

The NASIRA guarantee will be complemented with a bespoke Capacity Development project aimed at supporting Equity’s offering towards companies and smallholder farmers in the agricultural value chains with a target to grow the agriculture segment of Equity’s loan book to 30 per cent.

The technical assistance will help in strengthening the lender’s value proposition regarding financial and non-financial products and services for these customer segments.

Linda Broekhuizen, CEO of FMO said: “Funding for MSMEs is essential in lessening the impact of the pandemic on people’s livelihood and their communities. Together with the Capacity Development project we are confident small entrepreneurs will get much needed support.’’

The NASIRA guarantee is part of the EU External Investment Plan.

“Funding for MSMEs is essential in lessening the impact of the pandemic on people’s livelihood and their communities. Together with the Capacity Development project we are confident small entrepreneurs will get much-needed support’’

Linda Broekhuizen – Chief Executive Officer, FMO

“By investing €4.6 billion (US$5.4 billion) in EU funds, an additional €47 billion (US$55.4 billion) in total, investment will be leveraged globally from the public and private sector, EU Ambassador to Kenya,” Simon Mordue said.

“It will enable small business owners to access affordable loans through local banks, microfinance institutions and other non-banking financial institutions, “Mordue said. 

Mwangi noted that the guarantee supports Equity to mitigate and reduce risk in the MSME segment especially emanating from the pandemic that has slowed and reduced economic activity.

The bank’s non-performing loans (NPLs) has traditionally been 40 per cent lower than the industry.

“As we seek to build back better without leaving anyone behind, we will support MSMEs to adapt and fit in a new emerging global economy that is more resilient, agile and sensitive to sustainability,” said Mwangi.

The guarantee complements Equity’s program with MasterCard Foundation of creating five million jobs especially for youth by providing US$4.2 billion in funding to MSMEs.

The partnership with Mastercard Foundation is for US$73 million for loan guarantee, capacity building and technical assistance.

Equity Bank Kenya, a partner of FMO since 2007, is part of the Equity Group, one of the largest financial service groups in East Africa.

This is the seventh tranche for Equity Group after having signed a US$50 million loan facility with IFC in September; a US$100 million from Proparco in October and a EUR 147.3 million (Sh16.5 loan facility signed last week with the European Investment Bank.

It has also secured US$100 million credit facility with leading European development banks DEG, FMO and CDC-UK and a US$75 million loan facility from the African Guaranty Fund.

Another kitty is US$100 million loan from the African Development Bank (AfDB) and US$73 million facility from MasterCard Foundation, to fortify credit flows and liquidity to MSMEs totalling US$699.58.

NASIRA is an innovative financial program that supports young, female, and migrant entrepreneurs in Sub-Saharan Africa and countries neighbouring Europe. 

As a leading impact investor, FMO supports sustainable private sector growth in developing countries and emerging markets by investing in ambitious projects and entrepreneurs.

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