The International Finance Corporation (IFC) is planning a $300 million (Sh38.8 billion) risk sharing facility with London-based Standard Chartered Bank to support trade finance access for small and medium enterprises in eight African markets, including Kenya.
The IFC, a member of the World Bank Group, said it will contribute $150 million (Sh19.4 billion) in the three-year facility, which is targeting sectors such as agribusiness, healthcare, manufacturing, pharmaceuticals, and telecommunications.
“IFC will risk participation of up to 50 percent of eligible assets in the facility (up to $150 million for IFC’s own account) and will mobilise Standard Chartered Bank for the balance. This facility aims to support more than 300 suppliers in both domestic and global value chains and over the time period indirectly support over a million farmers in the target countries,” said the IFC in its disclosure.
“The supply chain finance assets in the portfolio will be originated in up to eight countries in Africa, including Ghana, Cote D’Ivoire, Kenya, Egypt, Nigeria, South Africa, Tanzania and Zambia.”
This proposed investment falls under the IFC’s Global Supply Chain Finance Programme, which was launched in 2022 to address financing gaps in emerging markets.
In Kenya, access to credit has been a problem for micro, small and medium sized enterprises (MSMEs) over the years, largely due to the perception by lenders that they carry a higher risk of default.
A periodic survey done by the Central Bank of Kenya (CBK) on lending to small enterprises showed that there were 890,000 active MSME loan accounts valued at Sh784.4 billion in the banking sector in December 2024, which represented a 24.7 percent decrease, down from 1.18 million active loan accounts valued at Sh783.3 billion as at the last survey in December 2022.
The decline in loan accounts was attributed to several factors including clean-ups of historical non-performing loan portfolios—including removal of duplicates—and increased repayments and loan closures.
High interest rates also slowed down uptake of new loan facilities, while also contributing to higher rates of default which made banks tighten credit standards for the small businesses.
The CBK survey showed that 28.4 percent (252,502 accounts) of total MSME loan accounts and 19.1 percent (Sh149.8 billion) of the total value of outstanding MSME loans were classified as non-performing by December 2024.
The non-performing loans (NPLs) in MSMEs made-up 21.5 percent of total banking industry NPLs of Sh697.3 billion as at December 2024, up from 17.5 percent in December 2022, when the industry total stood at Sh515.7 billion.
The survey further showed that the largest proportions of MSME loans from commercial banks were extended to the trade sector (39.5 percent), real estate (18 percent), transport and communication (9.3 percent) and manufacturing at seven percent.
On the other hand, MSME sectors that had the lowest bank credit allocation were energy at 3.3 percent, financial services at 2.9 percent and mining at 1.3 percent.
