Equity Bank has received Sh16.5 billion financial support from the European Investment Bank and the European Union for onward lending to small scale businesses smarting from Covid-19 trade disruptions.

The loans, which will be available at a rate of 13 per cent to borrowers, especially youth and women-run SMEs including those involved in agro processing and will be critical in boosting business resilience at a time of global economic slowdown.

The pandemic recovery financing is a package of €100 million from the European Investment Bank (EIB) and €20 million worth of grant from the European Union (EU). The grant will cushion Equity Bank from any shocks in the event some borrowers face loan repayment difficulties. The deal is part of the larger €300 million EU response to the Covid-19 crisis in Kenya.

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Equity Bank in collaboration with the EU will be extending a range of technical support to ventures in agriculture to bolster assessment, execution and monitoring of long-term agricultural value chains in Kenya.

About 65 per cent of Kenya's exports are agricultural products and the industry provides about 60 per cent of the country's job opportunities while accounting for over 33 per cent of the Gross Domestic Product (GDP).

Agriculture is, however, largely constrained by limited access to long term financing that stimulates growth and creation of jobs especially for the youth, a demographic that has suffered massive job losses during the pandemic.

“As an inclusive regional financial institution, these facilities strengthen Equity’s position to further enhance the strength of MSMEs which are key actors in value chains and ecosystems in the economy,” said Equity Group CEO, Dr James Mwangi.

By ensuring their survival and growth, the Micro, Small and Medium Enterprises (MSMEs) will continue to protect jobs, create more jobs and support lives and livelihoods in the society, serving to create resilience as the Covid-19 pandemic subsides; vaccines become available in Kenya, and market growth returns, added Dr Mwangi.

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Statistical data estimates that Kenya’s MSMEs contribute about 40 per cent of the country's GDP with the majority falling within the informal sector leaving them with very limited access to financing. For MSMEs to access the EIB-backed Covid-19 recovery loans, potential beneficiaries will be evaluated on the strength of their cash flows, noted Dr Mwangi.

Equity Bank said it will work closely with the Kenya Association of Manufactures as well as the Kenya National Chamber of Commerce and Industry in reaching out to ventures hard hit by the pandemic with a view to offer support.

Thomas Östros, Vice President of the EIB said the support will help entrepreneurs, business and agricultural small holders across Kenya to access finance and better withstand the economic challenges and business uncertainties caused by COVID-19.

According to data from the National Treasury the Kenya’s economy contracted to 2.5 per cent in 2020, a significant slump from the 6.1 per cent growth posted previously.

In the last 10 years, the EIB has worked closely with 17 banks and financial institutions in Kenya, helping the lenders to scale up access to credit by Kenyan businesses.