Saturday, July 2, 2022

Equity to lend small businesses, individuals Sh. 678 billion

Equity Group has launched a private sector focused stimulus package worth Sh. 678 billion to accelerate economic recovery and resilience in the Eastern and Central Africa region. The package will see Equity Bank loans worth this amount disbursed to businesses and individuals within the region.

The package plan will see the bank provide financing of up to 2 per cent of the combined GDP of the six economies where it operates. The financing will be directed at the private sector and will be in form of blended financing of short-term overdrafts, medium term loans, and credit facilities which require long-term project and development financing.

 “A total of Sh. 678 billion will be available to 5 million MSMEs and 25 million individual borrowers for the next 5 years. The plan conceives that the 5 million businesses largely comprising MSMEs will create 50 million jobs, 25 million jobs directly and an equal number of jobs indirectly as the ecosystems of business become more cohesive, connected, and ultimately synergize and grow,” said Dr. James Mwangi, Equity Group Managing Director and CEO.

He added that the recovery plan will have special focus on youth and women, supporting them to be the primary drivers of creating and expanding opportunities in the real economy. Under the Young Africa Works Initiative in partnership and collaboration with the Mastercard Foundation, the plan will build capacity in young people through financial literacy, entrepreneurship training and digital literacy. To ensure that no one will be left behind, lending to young people will be complemented with credit guarantee facilities to mitigate default through our credit risk pricing model that has opened inclusive credit access to all.

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“Risk based credit pricing has enabled us to adopt a transparent, all-inclusive interest rate, at the current average central bank rate that ranges from 13% to 18.5% for the lowest risk and the highest risk categories respectively,” Dr. Mwangi said.

The recovery plan will focus on five thematic areas including food and agriculture, manufacturing and logistics, trade and investments, micro small and medium enterprises, and social impact and environmental investments. The recovery and resilience plan seeks to leverage on productive capacities and comparative advantages to transform the region into a manufacturing hub that converts agricultural raw material into finished products for export and national use. The plan covers value addition for all primary products including retaining value in mineral processing to export semi-finished and finished products.

MSMEs are the largest vehicles for indigenous capital and entrepreneurship and will contribute significantly to local capital formation and employment.  “The Group has pilot tested lending to young people under the Young Africa Works in partnership with Mastercard Foundation with a resounding success rate of 436,000 MSMEs trained and funded to the tune of Sh. 136 billion, and 1.2 million jobs created by the enterprises as they expand and grow on access of financing,” said Dr. Mwangi. “The objective of the plan is to formalise the informal sector of MSMEs by linking them with formal manufacturing and primary food and agriculture sectors and by populating their value chains and ecosystems to achieve growth and resilience while accelerating recovery of the MSME sector.”

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