The African Development Bank (AfDB) and Diamond Trust Bank (DTB) Kenya Ltd on Wednesday signed two agreements totaling Ksh 7.6 billion (US$ 75 million), to be used to finance SMEs and local corporates in the country.
Under these agreements, AfDB will provide a Ksh 5 billion (US$ 50 million) Line of Credit and a Ksh 2.5 billion (US$ 25 million) Subordinated Debt facility to DTB.
“The Subordinate Debt will bolster DTB’s balance sheet by enhancing its Tier II capital, a crucial catalyst for its continued expansion in Kenya and other East African markets. The Line of Credit will provide financing support to small and medium enterprises (SMEs) – DTB’s niche customer segment – and emerging as well as established local corporates in East Africa, involved in trading, manufacturing, transport and construction, among other sectors, thereby facilitating financial access to businesses and thus enhancing job creation. Increased trade in Africa is key to supporting the region’s continued economic growth and development,” said Gabriel Negatu, Director General of the Bank’s Business Development and Delivery Office in East Africa.
“Promoting manufacturing and value addition in varied sectors are, therefore, an important part of our strategy to support Africa’s fledgling private sector with a view to enhancing the share of tradable goods. Our collaboration with commercial banks such as DTB is critically embedded in that fact that funding is an important enabler of private’s sector growth,” he added.
East Africa is one of the most economically vibrant regions on the continent. SMEs are critical to the expansion of the region’s economy, as they possess great potential for employment generation, output diversification, development of indigenous entrepreneurship and forward integration with large-scale industries.
There has been, however, gross under-performance of these enterprises which has undermined their contribution to economic growth. Various issues undermine their performance of which shortage of finance, particularly long term funding, is the most daunting challenge. DTB is an important financier of SMEs and local corporates in East Africa.
“This collaboration will enable DTB to entrench its position as a leading business bank in East Africa, helping more local companies grow and compete in the African and global marketplace,” said DTB Group CEO & Managing Director, Nasim Devji.
“The funding package will be pivotal in DTB’s strategy of supporting the economic transformation of Kenya and, by extension, East Africa, making the region’s economy more resilient and diversified,” she added.
This intervention is well- aligned with AfDB’s Ten Year Strategy, 2013-2022, as well as some of the Bank’s High-5 Strategic priorities including, Integrate Africa, Industrialise Africa, Feed Africa and improving the living conditions of Africans. It will help to increase enterprise development and competitiveness through expansion of the economic base.
This will be made possible by enhancing access to financial services and expanding access to social and economic infrastructure, which will thus contribute to inclusive growth.