IFC signs agreement to insure SME loans from Bank of Africa

Capital markets

IFC signs agreement to insure SME loans from Bank of Africa


Bank of Africa Kenya Managing Director Ronald Marambii. PHOTO FILE | NMG

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Summary

  • IFC has signed an agreement to provide Bank of Africa Kenya with coverage against losses on SME loans as the lender seeks to increase its financing for small businesses.
  • IFC, which is the private sector lending arm of the World Bank, said the facility will cover 50 percent of losses on all eligible loans that Bank of Africa Kenya has.

The International Finance Corporation (IFC) has signed an agreement to provide Bank of Africa Kenya with coverage against losses on loans to SMEs as the lender seeks to increase its financing for small businesses.

IFC, which is the private sector lending arm of the World Bank, said the facility will cover 50 percent of losses on all eligible loans that Bank of Africa Kenya (BOA Kenya) grants to SMEs, up to the equivalent of 5 million shillings. (Sh650 million).

The deal will also see IFC providing the Tier Three bank with advice on how to mitigate risk as it moves into the SME segment, which is considered one of the riskiest in the industry. banking.

“IFC’s risk mitigation product, combined with support for general and targeted advisory services, will help BOA Kenya reduce risk and scale up lending to SMEs in its most challenging markets. Additionally, it will help us transform into an SME-focused bank with branches across Kenya, ”said Ronald Marambii, Managing Director of BOA Kenya.

Secured loans will largely target women-led businesses and those focused on addressing climate change.

BOA Kenya, which had a 0.72% market share in Kenya’s banking sector at the end of 2020, had a loan portfolio of 15 million shillings in September 2021, after declining by 17.23 billion shillings a year earlier .

It reported an after-tax profit of 4.58 million shillings for the nine months ending September 2021, reversing a loss of 217.9 million shillings reported in the corresponding period in 2020.

The IFC program is supported by the Global SME Finance Facility (GSMEF), which is a partnership between IFC and the UK Foreign, Commonwealth and Development Office and the Dutch Ministry of Foreign Affairs.

The Women Entrepreneurs Opportunity Facility (WEOF), a global financing mechanism dedicated to expanding access to capital for women entrepreneurs, was also supported in 2014 by IFC through its Banking on Women program and Goldman Sachs 10,000 women .

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