National Bank of Kenya (NBK) has partnered with African Guarantee Fund (AGF) to offer a partial guarantee in respect of defaults arising from loans to various private and public sector SMEs in the Water, Sanitation and Hygiene (WASH) sector, women-led businesses and green financing in Kenya.
The seven-year tenor guarantee will cover up to 50% of collateral needs for a qualifying facility with 75% cover for women and green SMEs – and will see the maximum cover for any borrower capped at Ksh100 million.
Speaking at the signing ceremony, Mr Peter Kioko, the Acting Managing Director at NBK, noted that the guarantee will go a long way in mitigating the challenge of access to affordable credit with favourable terms, a major hurdle MSMEs in the WASH sector and women-led enterprises face in scaling up their businesses.
“This strategic partnership will enable our MSME customers in the targeted sector to overcome the financing barrier in their day-to-day financial management needs and therefore, unlock opportunities to spur growth,” Mr Kioko said. “As NBK, we have a solid track record of supporting SMEs in Kenya and therefore with this partnership we will increase the number of SMEs we finance and also pay special focus to the women entrepreneurs, among others to facilitate their growth and in turn the growth of our economy.”
The guarantee facility will see AGF share the risks envisioned by the bank in situations where the target SME clients are unable to meet collateral threshold requirements.
“By expanding access to finance for SMEs in the WASH sector, our guarantee will improve the lives and health of Kenyans through increased access to safe hygienic and sanitation facilities,” AGF Group CEO, Mr Jules Ngankam said. “We will also particularly support green SME projects and Women-led/owned businesses that are at the helm of water and sanitation.”
Mr Ngankam said AGF partnership with NBK is a boost to Kenya’s target of universal access to water, sanitation, and hygiene services and ultimately, a step towards achieving the UN Sustainable Development Goal 6 of ensuring access to water and sanitation for all.
The guarantee builds on the foundational work of the bank’s MajiKonnect financing program for the Water Sanitation and Hygiene sector towards MSMEs, Corporates and Water Service Providers (WSPs). MajiKonnect, which was launched last year in partnership with Aqua for All, provided Ksh5 billion towards improved access to affordable water and sanitation.
Qualifying borrowers must be Micro, Small and Medium-sized Enterprises (MSME). The MSMEs mut also be registered and/or licensed SMEs domiciled in Kenya and must represent new or incremental business in the WASH sector geared towards investments designed to stimulate business growth.