Family Bank on Tuesday secured Sh3.33 billion from the European Investment Bank to lend to small and medium enterprises in cheap, long term loans.

Just two weeks ago, Family Bank inked another deal with Dutch Financier — Oiko Credit International’s East African subsidiary — to advance Sh1 billion in loans to the SMEs.

“We are excited that EIB’s confidence in the bank has enabled us to secure close to Sh6 billion in two tranches in only two years,” said Family Bank chief executive Peter Munyiri.

The lender received Sh2 billion two years ago from the European lender.

This year alone, the African Development Bank gave Sh15 billion ($148 million) to Equity Bank and Sh5 billion ($50 million) loan to Chase Bank to boost their SMEs lending capacity.

In November, Chase Bank also signed a Sh1.12 billion deal with French development agency, Agence Française de Développement (AFD), to strengthen its lending towards companies investing in clean energy projects.

AFD has also committed to offer an additional Sh2.2 billion (20 million euros) under the 12-year loan deal with Chase Bank.

The benefit of such loans — through partner financial institutions such as Family Bank — is that it is cheaper for the local lenders to borrow and loan to small businesses than to seek the finances from other sources.

A participating lender passes on this cost advantage to the eligible SMEs, which means that small firms directly benefit from the lender’s lower cost of borrowing.

Mr Munyiri said the funds will help spur the SME sector, which forms the bulk of revenue generation and job creation in Kenya’s economy.

The funding will, however, not be used as working capital or to refinance existing debt for the start-ups.

Banks have been seeking to raise working capital and money to expand loan portfolios amid tight guidelines by the regulator.

Family Bank has been seeking Sh10 billion through a mix of both debt and equity, but with particular focus to wooing the global lenders.