Equity Bank and the African Guarantee Fund have signed a Sh5.5 billion deal that will see the lender scale up its financing to small scale businesses amid Covid-19 economic fallout.

The bulk of the guarantee will support financing to the Micro Small and Medium Enterprises (MSMEs) owned and run by women by helping to lessen the risk and the cost of loans to the segment which has been disadvantaged for a long time in access to business financing.

“African wealth creation has its face in MSMEs. We needed long term funding and de-risk lending by sharing credit risks through credit guarantee,” said Equity Group CEO, Dr James Mwangi.

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The financing, which is billed to fight inequality in access to resources, is set to boost women participation in economic recovery post Covid-19 in Kenya, Uganda, Rwanda and DRC.

The bank plans to strategically walk with SMEs in the next three years when Covid-19 pandemic is expected to adversely affect the businesses due to adoption of various containment measures.

African Guarantee Fund CEO Jules Ngankam said: "This type of financing helps to see how we can offer a better product to finance businesses in Kenya.”

The lender’s agreement with the African Guarantee Fund comes barely a week after Equity Group signed a Sh10.96 billion ($100 million) loan deal with leading European development banks — Germany’s DEG, the Netherland’s FMO and Britain’s CDC Group — as it seeks to deepen lending to small scale businesses smarting from Covid-19 disruptions.

Early March, the lender also received Sh16.52 billion (€125 million) loan from European Investment Bank (EIB) and European Commission to augment its lending to MSMEs especially those in agriculture.

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"Sectors like agriculture recovered faster, while the hospitality industry was expected to recover in about a year hence the moratorium was based on the recovery rates for each," said Dr James Mwangi.

The latest financing agreement pushes the money that Equity Bank has secured for MSMEs support through Covid-19 crisis recovery to Sh52.25 billion.

Dr Mwangi said that bank has secured Sh8.25 billion in credit guarantee, effectively helping to de-risk the loans advanced to the MSMEs sector, which is the largest provider of employment in Kenya.

Equity has been funding enterprises under the ‘Young Africa Works’ program where the bank, the Mastercard Foundation and the Government of Kenya are working in sync to help create five million jobs for women and young people through entrepreneurship over the next five years.