NAIROBI, Kenya, Apr 19 – KCB Group has signed a Sh10 billion credit line from The African Development Bank (AfDB) to be used for lending to corporate businesses as well as Small and Medium Enterprises (SMEs) in infrastructure, energy and manufacturing – particularly value-addition.
This credit line will provide much-needed liquidity and further support population segments like the youth, effectively serving a dual purpose of enhancing job creation as well as facilitating financial access to businesses.
KCB Chief Executive Joshua Oigara says the funding will go a long way in supporting the bank’s interventions geared towards achieving the economic transformation of Kenya in line with the government’s Big Four Agenda.
The move comes even as local banks have reduced lending to SMEs due to the interest rates capping that has seen banks lending.
A study on the impact of interest rate caps on the Kenyan Economy published by the Central Bank reveals that interest caps have instead led to a reduction of the number of loans going to SMEs.
Reduced lending to the MSMEs contributed to a 1.4 per cent decline in the growth of GDP in 2017 and will shave off 0.40 per cent of the real GDP in 2018.
CBK says the number of loans have declined significantly since the coming into force of the Banking Amendment Act in September 2016 that set the maximum lending rate at no more than 4 per cent above the Central Bank base rate.
To balance the loan book, Banks have increased the value of loans by 36.7 per cent mainly by lending to the less risky segments of large established firms, personal loans – which are secured by payslips – and government bonds.
This intervention is aligned with AfDB’s 10 year strategy, 2013-2022, as well as one of the bank’s high-5 strategic priorities of improving the living conditions of Africans.
It will help to increase enterprise development and competitiveness through expansion of the economic base.
The funding line is expected to further strengthen KCB’s catalytic role in Kenya’s economy as a financial services enabler.
“This strategic partnership between the two institutions reflects their continued commitment to finance projects in agriculture and food security, renewable energy, SMEs as well as youth segment, said Oigara.
The bank posted a profit of Sh19.7 billion for the year ended 2017, a flat growth having posted the same amount in 2016.
Nonperforming loans grew by 8.5 per cent, attributable to the SME and microenvironment with provisions for bad debts went up by 55 per cent from Sh3.8 billion to Sh5.9 billion.