CBA signs Sh9.2bn facility to lend SMEs

October 6, 2017
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The funding is aimed at supporting SMEs and local corporates in infrastructure, tradable and other transformative sector transactions in Kenya/FILE

, NAIROBI, Kenya, Oct 6 – The African Development Bank (AfDB) has signed a Sh9.2 billion financial package comprising a Sh5.1 billion Line of Credit and Sh4.1 billion Trade Finance Line of Credit (TFLoC) with Commercial Bank of Africa (CBA).

The funding is aimed at supporting SMEs and local corporates in infrastructure, tradable and other transformative sector transactions in Kenya.

AfDB Director General for the East Africa Regional Hub Gabriel Negatu said the financial package will provide liquidity support for CBA to expand financing in a bid to enhance job creation and facilitate financial access to businesses.

“The financing will help increase enterprise development and competitiveness through expansion of the economic base. This will be made possible by enhancing access to financial services and expanding access to social and economic infrastructure which will thus contribute to inclusive growth,” he added.

The funding will also contribute to CBA’s endeavours to complement the efforts of various partners such as the Government of Kenya’s Long-Term Development Strategic Agenda Vision 2030.

This vision seeks to revitalise the economy by developing infrastructure and improving access to affordable credit for SMEs which is working towards supporting the economic transformation of Kenya’s economy to make it more resilient and diversified.

“We are grateful to the AfDB for the financial support extended to us. It will immensely contribute to CBA’s efforts to broaden access to its services, thus reducing financing constraints faced by SMEs and local corporate in Kenya whilst reducing Africa’s trade financing gap. The intervention will also promote private sector development as well as support broad-based economic growth in line with Kenya’s industrialization strategy “said Isaac Awuondo, the Group Managing Director, CBA Limited.

The move comes even as banks limit credit to the private sector due to the interest rates capping that came to effect in August 2016.

The Central Bank of Kenya Commercial Bank Credit Survey, which was undertaken between April and June 2017, shows that 45 per cent of the commercial banks said interest rate capping had little effect on the actual loans issued, while the other 45 per cent said actual credit granted decreased.

According to the survey, Commercial Banks have taken a wait and see approach on how the market will react to the capping of interest rates. This trend was the same in the previous quarter.

On demand for credit, interest rate capping led to increased demand for credit for 35 per cent of banks who attributed this to cheaper credit.

Gross loans decreased by 0.84 per cent from Sh2.38 trillion in March 2017 to Sh2.36 trillion in June 2017.

This decrease in gross loans was mainly attributable to a reduction in loans granted to support the transport and communication, trade, agricultural, real estate, mining and quarrying sectors.

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