Family Bank gets 1.5 billion shillings insurance for SME loans


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Family Bank gets 1.5 billion shillings insurance for SME loans


Family Bank head office in Muindi Mbingu Street in Nairobi. FILE PHOTO | NMG

Summary

  • Family Bank has renewed its agreement with the African Guarantee Fund (AGF) to insure against default losses on loans worth 1.5 billion shillings through a portfolio guarantee facility.
  • This collateral agreement will cover funded facilities such as overdrafts, term loans and unfunded facilities such as letters of credit and bank guarantees, among other credit facilities.
  • The lender entered into two portfolio loan agreements with AGF worth 250 million shillings in 2015 and 774 million shillings in 2018.

Family Bank has renewed its agreement with the African Guarantee Fund (AGF) to insure against default losses on loans worth 1.5 billion shillings through a portfolio guarantee facility.

The program targets micro, small and medium-sized enterprises (MSMEs), women-led businesses and climate-friendly investments by providing them with more loans over a five-year period.

This collateral agreement will cover funded facilities such as overdrafts, term loans and unfunded facilities such as letters of credit and bank guarantees, among other credit facilities.

The lender entered into two portfolio loan agreements with AGF worth 250 million shillings in 2015 and 774 million shillings in 2018.

In addition to the loan facility, AGF will provide capacity development assistance by offering technical expertise to MSMEs and exposing entrepreneurs to global knowledge on business development and climate-smart businesses.

“Through this credit facility, Family Bank can increase lending to MSMEs who constitute over 80% of our client base,” said Rebecca Mbithi, Managing Director of Family Bank.

“As the economy gradually recovers…we are able to expand our capital base to support more MSMEs by providing credit on favorable terms.”

Loan guarantee agreements are increasingly popular in Kenya, seeking to encourage banks to lend more to SMEs, which are deemed riskier, with the benefit of sharing potential losses with credit insurance providers.

“Our loan portfolio guarantee agreement with Family Bank is structured to reduce the perceived risk of SMEs and meet their holistic needs through capacity development assistance,” said Jules Ngankam, Chief Executive Officer of AGF Group. .

The partnership aims to unlock financing to facilitate the promotion, growth and development of SMEs.

Loans to SMEs are traditionally considered to have a higher risk of default than loans to large, established private companies and public institutions.

This is why some banks have chosen to insure all or part of their SME loan portfolios. Recent revelations, however, have shown that large corporations are now the main source of growth in defaults in the banking sector.

So far, AGF has unlocked financing worth over $200 million (23 billion shillings) in Kenya, benefiting over 4,000 businesses through various banks.

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