AGF issues US$12m guarantee facility to Family Bank for MSME lending

KENYA – Family Bank, a commercial bank in Kenya, has secured KSh1.5 billion (US$12.98m) loan portfolio guarantee facility from African Guarantee Fund (AGF) to increase its loan book to micro, small and medium-sized enterprises (MSMEs), women-led businesses and climate-friendly investments.

In addition to the extension of the credit guarantee facility, the African Guarantee Fund will provide a capacity-development assistance to Family Bank that will be utilized for technical expertise to the MSMEs and expose entrepreneurs to global knowledge on business development and climate-smart ventures through the five-year agreement.

“SMEs are very crucial to the achievement of meaningful sustainable development. Their greatest barrier, however, is access to finance,” AGF Group Chief Executive Officer, Jules Ngankam said.

“Our loan portfolio guarantee agreement with Family Bank is structured to reduce the perceived risk of SMEs and to solve their holistic needs through Capacity Development assistance. Additionally, this renewed partnership will also focus on empowering women-owned and climate-focused SMEs.”

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

“Through this credit facility, Family Bank can scale up lending to MSMEs who form over 80% of our customers base,” Family Bank Chief Executive Officer Rebecca Mbithi said.

“With the gradual recovery of the economy as we contain the effects of the pandemic, we are able to widen our capital base to support more MSMEs by extending credit at favourable terms.”

Previously, Family Bank has had two loan portfolio agreements with AGF worth KSh250 million (US$2.16m) in 2015 and KSh774 million (US$6.70m) in 2018.

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

So far AGF has unlocked financing worth more than US$200 million (KSh23 billion) in Kenya, benefitting more than 4,000 businesses through various banks.

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