Financing SMEs in Kenya: “Our vision is to be the champion of the socio-economic prosperity of the people of Africa. We value integrity, innovation, and respect for our clients.” These words were said by the Equity Group Executive Director Mary Wamae when Equity Bank joined the SME Finance Forum in September last year. The forum is a global network that is managed by the International Finance Corporation. It comprises financial institutions, tech firms and development finance institutions. The forum is aimed at promoting the financial growth of small and medium enterprises.
Joining this forum was not so far-fetched for a bank that is oriented towards nurturing micro small and medium businesses, and the extension of financial products and solutions to the common man.
In the same vein, joining the IFC forum was the latest partnership between Equity bank and the IFC which has better aligned the Kenyan lender to offer financial services to SMEs more effectively. For example, in February last year, IFC started offering advisory services to Equity Bank with the aim of helping the lender to better serve its base of small and medium-sized (SME) customers.
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“This is a banking advisory services project with Equity Bank Kenya Ltd and is designed to increase Equity Bank efficiency to serve its SME customers. The IFC Advisory Service will assist the Bank design and deliver an efficient SME business model, improve SME credit related processes and train staff to effectively serve the targeted SME segments,” IFC said in a statement. Currently, Equity is the country’s leading SME bank. The bank’s SME segment comprises of close to 60 per cent of the bank’s loan portfolio. This is backed up by a country-wide coverage through a network of 177 branches and over 32,000 agents, and its innovative digital channels.
According to the Central Bank of Kenya, SMEs contribute close to 30 per cent of Kenya’s GDP. In Africa, SMEs account for 90 per cent of the businesses in most countries and create about 80 per cent of jobs. In Kenya, though, about 46 per cent of these businesses close within a year of establishment while another 15 per cent fall on the wayside in the second year. Data from the Kenya National Bureau of Statistics (KNBS), SME growth is largely hindered by inadequate capital, poor infrastructure, lack of skilled manpower, lack of water and power, and interference from authorities.
This is why the expanded offering of loans and financial advisory to small enterprises in the country has come as a relief to millions of businesses. According to financial analyst James Njenga, this is mainly because the local SME sector is stifled in developing new products and financing existing customer orders due to lack of finance.
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“Since Equity Bank started as a small business, we understand the hurdles MSMEs and businesses face, including lack of access to capital and markets and lack of business management knowledge and skills. As a Bank, we have championed MSME banking through the provision of professional, flexible and integrated banking services,” says Bank Corporate Banking – SME Associate Director Jeremy Kamau.
The majority of small entrepreneurs in Kenya seek between Sh. 50,000 and Sh. 1 million in financing. In response to these needs Equity Bank has been working towards the enhancement of access, convenience and affordability of financial services by providing financial services to this segment, the low income segment, and the unbanked population,” says Mr. Njenga. “This is the primary reason the bank has partnered with multinational financiers, and has been a major recipient of billions of money for onward SME lending.”
Apart from financing SMEs in Kenya, the bank has also extended mentorship programmes that are helping budding businesses to streamline their operations. This include identifying of valuable collateral to act as security for their financing, advisory on registration of businesses, aligning of financial statements, keeping and updating of proper books of accounts, balance sheets, and cash flow projections.