Kenyan small and medium sized businesses will benefit from increased access to long-term and attractive funding in local and foreign currency under a new EUR 70 million European Investment Bank lending scheme with leading Kenyan banks. Under the initiative launched in Nairobi today Co-operative Bank and Housing Finance Company Limited will use European Investment Bank funding to finance SME investment.
The Private Enterprise Finance Facility III scheme will finance the expansion, modernisation or start-up investment costs of small and medium sized companies in Kenya. Funding will be available in Kenyan shillings, US dollars and Euro. The programme will focus on enhancing the availability of funding for companies active in manufacturing, transport, tourism, agribusiness, education and healthcare and other eligible sectors. Kenyan SME’s are estimated to account for 75% of all jobs in the country.
European Investment Bank Vice President Plutarchos Sakellaris, responsible for the lending activities of Europe’s long-term lending institution, and the Group Managing Director Co-operative Bank Dr. Gideon Muriuki and the Managing Director Housing Finance Company Limited Mr Frank Ireri were present at the signing ceremony held in Nairobi.
“Access by small and medium sized business to long-term finance is essential for creating new jobs and economic growth in Kenya. The European Investment Bank looks forward to working with Kenya’s leading banks to reinforce private sector investment over the coming years and build on a strong track record of supporting entrepreneurs across the region.” said Plutarchos Sakellaris, European Investment Bank Vice President.
“Co-operative Bank traditionally has been a key player in banking the Small and Medium Enterprises sectors and these funds will enhance the existing capacity to benefit Kenyan business much further. The bank founders created the institution to benefit the ordinary Kenyans both in the Co-operative movement and outside it. This lending is therefore part of our responsibility to support the ordinary Kenyan entrepreneurs.” Dr. Gideon Muriuki, Group Managing Director, Co-operative Bank.
‘’The European Investment Bank has shown real vision and commitment towards the SME Sector in Africa, taking the time to understand what is needed thus enabling we in the financial sector to support the industry in meaningful ways. We welcome their role and look forward to utilising this funding line to support the growth of SME’s in the property industry in Kenya’’, said Housing Finance Managing Director, Mr. Frank Ireri.
"By European standards, Kenya has a substantial and dynamic private sector. The role played by the private sector is vital. The private sector is one of the key drivers to support development, to stimulate growth and to lift people out of poverty. The new programme launched by the European Investment Bank undoubtedly will reinforce our partnership with Kenya and the EAC region as a whole" said Ambassador Lodewijk Briët, Head of the European Union Delegation to Kenya.
Under the Private Enterprise Finance Facility III scheme co-financing of SME lending will be shared by the partner banks. Co-operative Bank will receive EUR 50m and Housing Finance Company Limited EUR 20m which will then be used to fund small businesses. Dedicated technical assistance funding will also be made available both to help Kenyan firms seeking investment funding, for example to help with preparation of a business plan, and to improve the effectiveness of small business lending by partner banks.
The Private Enterprise Finance Facility III follows the success of the recently launched PEFF II and will contribute both to the long-term development of the Kenyan banking industry and East African financial sector, and ensure that more funding is available to private enterprises. Growth and investment to explore new opportunities by many companies in the region is currently hindered by challenges getting access to funding. Intermediary banks will ensure that environmental impacts of projects financed under the scheme are identified and mitigated following relevant local and international standards. More banks are expected to join the initiative soon.
The European Investment Bank has been supporting long-term lending to Kenyan SMEs through local intermediary banks since 1991 and is the only international financial institution to provide local currency, long-term financing through local banks in the country. A new lending programme to support microfinance in East Africa is also being launched today by the European Investment Bank.