SMEs borrow Sh68.5 billion from Equity

Equity Bank’s borrowed funds for SMEs jumped 19.7 percent to Sh68.5 billion over the three months to September as development finance institutions began disbursing cash for onward lending to small businesses.

The bank had received commitments from the World Bank’s private-sector lending arm, International Finance Corporation (IFC) and Agence Française de Développement Group’s Proparco for billion-shilling loans to lend to small and medium enterprises (SMEs).

IFC pledged a $50 million (Sh5 billion) loan while Proparco committed to a $100 million (Sh10 billion) partnership with Equity.

Group CEO James Mwangi said the lending has mainly gone towards manufacturing of personal protection equipment, logistics, online businesses, agro-processing, fast-moving consumer goods and agriculture value chains.

“We grew our loan book by 30 percent year-on-year to support our customers who saw opportunities of green shoots and diversification in the Covid-19 environment,” he said.

The funds come at a crucial time for the lender as it needs low-cost money to finance its loan book given the heightened rate of loan default.

This also provides a war chest to leverage against the State-backed SME Guarantee Fund set to unlock loans from banks with the government taking over part of the credit risk.

Equity has been opening its purse strings growing loans 30 percent from Sh348.9 billion in the third quarter last year to Sh453.8 billion by September. This saw the bank’s net interest income grow to Sh39.3 billion from Sh32.3 billion.

This saw the bank’s net interest income grow to Sh39.3 billion from Sh32.3 billion, while non-funded income shrugged off the impact of the free mobile transaction to record an 11 percent growth to Sh24.4 billion from Sh22 billion.

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