Equity Bank’s borrowed funds for SMEs jumped by 19.7 per cent to Kshs 68.5 billion over the three months to September as development finance institutions began disbursing cash for onward lending to small businesses.
The bank had received commitments from the World Bank’s private-sector lending arm, International Finance Corporation (IFC) and Agence Française de Développement Group’s Proparco for billion-shilling loans to lend to small and medium enterprises (SMEs).
IFC pledged a $50 million (Kshs 5 billion) loan while Proparco committed to a $100 million (Kshs 10 billion) partnership with Equity Bank. The funds come at a crucial time for the lender as it needs low-cost money to finance its loan book given the heightened rate of loan default.
This also provides a war chest to leverage against the State-backed SME Guarantee Fund set to unlock loans from banks with the government taking over part of the credit risk.
Equity has been opening its purse strings growing loans 30 per cent from Kshs 348.9 billion in the third quarter last year to Kshs 453.8 billion by September. This saw the bank’s net interest income grow to Kshs 39.3 billion from Kshs 32.3 billion.
Group CEO James Mwangi said the lending has mainly gone towards manufacturing of personal protection equipment (PPE), logistics, online businesses, agro-processing, fast-moving consumer goods and agriculture value chains.
“We grew our loan book by 30 per cent year-on-year to support our customers who saw opportunities of green shoots and diversification in the Covid-19 environment,” he said.
This saw the bank’s net interest income grow to Kshs 39.3 billion from Kshs 32.3 billion, while non-funded income shrugged off the impact of the free mobile transaction to record an 11 per cent growth to Kshs 24.4 billion from Kshs 22 billion.