I&M Bank Kenya has signed an agreement with Dutch development bank FMO to insure the lender against defaults of up to 1.7 billion shillings ($15 million) extended to small and medium enterprises.
Through the Nasira portfolio of guarantees, the bank will extend credit to young, women-led and migrant entrepreneurs who have been affected by the pandemic, to enable their sustainability and create jobs.
The risk-sharing facility is expected to help the I&M Group subsidiary expand its lending activities beyond corporate clients to the micro, small and medium-sized enterprise (MSME) sector which is deemed too risky to lend to those who cannot. meet the guarantee threshold requirements.
“I&M Bank bases its business model on empowering prosperity for all its stakeholders. We strongly believe that the FMO Guarantee will help our (M)SME customers accelerate their business growth and support their expansion efforts while providing support to customers negatively impacted by Covid-19,” said Kihara Maina, CEO of I&M Bank Kenya.
The Nasira program is enabled by the European Union through the European Fund for Sustainable Development and MASSIF, the financial inclusion fund that FMO manages on behalf of the Dutch government.
Nasira partially guarantees the value of the loan to a borrower by offering to share future credit losses in the event of default, allowing local banks to provide loans to individuals and businesses deemed risky by commercial banks.
The fund will help I&M Bank focus primarily on corporate clients, increase access to finance for SMEs, and provide digital solutions such as FinTech partnerships for a smooth transition.
“This latest guarantee is fully aligned with our strategy and contributes to SDGs 8 and 10 for decent work and economic growth, as well as reducing inequalities,” said Huib-Jan de Ruijter, Chief Investment Officer of FMO .
“We look forward to expanding our mandate through Nasira with the opening of EFSD Plus (EFSD+) this year, significantly increasing our contribution to inclusive growth, job creation and sustainable development in a wider range of geographies and industries.”
Since the capping of interest rates on loans introduced in September 2016, the banking sector had avoided lending to SMEs it labeled as high-risk firms for fear of high defaults.